Lending Rate Reform Could Benefit Big Borrowers Most, Analysts Say

Caixin Global | Aug 19, 2019 at 8:51 PM
  • China’s plans to reform its lending interest rates to make them more market-oriented and cut borrowing costs could benefit bigger, state-owned borrowers the most, economists said, after the central bank unveiled further details about its efforts to merge its two tracks of interest rates on Saturday.
  • The banks’ lending interest rates will be linked to the interest rates on the PBOC’s lending to the banks through open-market operations, giving the central bank a way to still affect the cost of borrowing in the economy.
  • The 18 commercial banks will set their own LPRs by adding multiples of five basis points to the interest rates of open-market operations undertaken by the central bank, chiefly the medium-term lending facility (MLF), a kind of policy lending tool that the PBOC uses to manage liquidity in the financial system.