BEIJING, Feb. 18 (Xinhua) -- China's cut of the 1-year medium-term lending facility (MLF) rate by 10 basis points (bps) gives leeway to lower financing costs of real economy enterprises, said Chen Li, head of research institute under Chuancai Securities.
On Monday, the 1-year MLF rate dropped from 3.25 percent to 3.15 percent when China's central bank offered 200 billion yuan liquidity via the tool. The central bank also conducted 100 billion yuan of 7-day reverse repos with its auction rate unchanged from the previous auction.
According to Chen, the move is to some extent a signal of the possible February adjustment of loan primate rates (LPR), a reference for lenders to set their loan interest rates, thus further downturn of the financing costs of real economy enterprises is expectable.
Currently, China's economic fundamental supports expectations for further decrease in LPRs. Amid the present fight against the epidemic, enterprises have greater demand for costs reduction.
Last year, China reformed the LPR mechanism under which the LPRs are mainly guided by rates of open market operation vehicles such as the MLF and banks set their rates of loans by adding basis points to related LPRs.
Since then, the auction rates of MLF are closely linked with lenders' loan rates, which effectively streamlined correlation between the two sets of interest rates.
Later on Thursday, the National Interbank Funding Center will publicize the 1-year and 5-year LPRs for February. The center releases the LPR rates on the 20th day of each month. (Edited by Duan Jing, duanjing@xinhua.org)
A single purchase
