The People’s Bank of China lowered one of the country’s most important lending rates, which shows that the government is promoting policy easing measures to cope with the loss of economic momentum.

The central bank lowered the best lending rate for one-year loans from 3.85% to 3.8%, which is widely used as a benchmark for banks to provide loans to customers. Monday’s rate cut was the first rate cut since April 2020, when the country was struggling to deal with the initial outbreak of the coronavirus.

China’s economyThe rebound from the impact of the coronavirus pandemic last year was much faster than that of other large economies, and has recently been pressured by slowing real estate, energy shortages and continued weakness in consumer activity.

Gross domestic product in the third quarter 4.9% year-on-year increase, This is the slowest rate of the year. Since then, challenges in the national real estate industry have intensified. New house prices have fallen for several months. The debt-laden developer Evergrande has breached contracts with several peers.

The People’s Bank of China lowered the bank deposit reserve ratio this month, which actually injected nearly US$200 billion into the financial system. However, last week, the central bank kept the medium-term lending rate — the interest rate at which the central bank lends to banks — at 2.95%.

Economists and analysts said that China has entered an easing cycle and pointed out that it will further cut interest rates in the first half of next year.

Ken Cheung, chief Asian foreign exchange strategist at Mizuho, ??said that the lower LPR “shows that China’s economy is under increasing downward pressure and that the People’s Bank of China intends to support growth.”

The economist at Société Générale stated that “the seemingly small reduction [to the one-year LPR] Reflects the increasingly dovish policy stance.” It added: “So far, every step seems to be trivial and restricted, which only means that more steps are required. “

Concerns about asset bubbles prompted Beijing last year to introduce measures aimed at limiting the leverage of its largest developer, and to restrict bank mortgage loans as part of its balance sheet at the beginning of this year.

Despite the economic slowdown and response, the government has shown its commitment to deleveraging measures. The preferential five-year loan interest rate used to price mortgages was kept unchanged at 4.65% by the People’s Bank of China on Monday.

The November economic data released last week highlighted the decline in real estate investment. Compared with the same period last year, retail sales increased by only 3.9%, lower than expected, while industrial production increased by 3.8%.