What will China’s central bank do
China's central bank will issue a first batch of low-cost loans to reduce carbon emissions by the end of the month. Will Chinese loans to the country's financial institutions make a difference?
It has been rumored for some time that Beijing intended to lower interest rates to make loans a tool for reducing CO2. Now, however, the government news agency Xinhua , citing an interview with central bank governor Yi Gang , appears to confirm that the first loans will come shortly.
The People's Bank of China (PBOC) in November outlined the main elements of this transaction. The PBOC would provide 60% of the loan capital contracted by financial institutions for carbon cuts. The one-year lending rate would have been 1.75% (the primary lending rate is currently 3.8%).
The measure appears in line with China's global goal of bringing emissions to their peak before 2030. China , in fact, wants to achieve carbon neutrality by 2060 without damaging the economy, already marked by the fallout from the COVID pandemic. -19. China's economy, the largest in the world after the US, faces the triple pressure of falling demand, supply problems and weakening expectations, Yi said, reiterating an earlier official comment.
In search of stability, Chinese loans will have lower interest rates
"The macroeconomic market must be stabilized," said the governor of the Chinese central bank, Yi Gang . “It is necessary to let the shareholders of the companies and the local authorities take responsibility for the risk events that occur in the market”.
Yi said the PBOC will keep its monetary policy flexible and appropriate, and liquidity ample. In fact, China cut its benchmark lending rate for the first time in nearly two years this month. The one-year primary loan rate (LPR) – the rate on most loans – was cut from 3.85% to 3.8%. The five-year LPR – which is instead the benchmark for mortgages – remained at 4.65%. The LPR is considered, from 2019 to date, the de facto cost of financing of reference for China.
The summary of these interest rates, concludes Yi Gang, is that businesses can obtain loans at an average interest rate of 5%. It's an all-time low for the country but the PBOC governor said he will increase the refinancing rate to small businesses if needed. He also said financial risks are under control and expectations for the housing market have improved. “The structural adjustment of the real estate market is conducive to the formation of a new development model for the country's real estate sector”.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/cina-banca-centrale-emissioni/ on Sat, 01 Jan 2022 07:00:03 +0000.