China cuts key interest rate as economy slows

Financial troubles in the real estate sector pose a major obstacle to growth

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China's central bank on Monday cut a key interest rate in an attempt to counter the post-covid growth slowdown in the world's second-largest economy.

Activity has been dragged down recently by uncertainty in the labour market and global economic sluggishness, weakening demand for Chinese goods.

Financial troubles in the real estate sector, with several leading developers on the verge of bankruptcy and struggling to complete projects, also pose a major obstacle to growth.

The People's Bank of China on Monday cut the one-year loan prime rate, which serves as a benchmark for corporate loans, from 3.55% to 3.45%.

However, the five-year LPR, which is used to price mortgages, was held at 4.2%.

Closely followed by the markets, the two rates are now at historic lows, after previous reductions in June.

The decision is intended to encourage commercial banks to grant more loans and at more advantageous rates.