Analysts generally doubt how effective the People Bank of China's latest interest rate announcement will be in significantly helping businesses grow.
"I think LPR could help lower the funding cost for SMEs, albeit modestly," Larry Hu, chief China economist at Macquarie, said in an email. "But it could not do much about the key constraint for credit growth at this stage: the lack of credit demand."
Privately run businesses account for the majority of employment and economic growth in China. But the country's giant state-owned enterprises have typically had an easier time getting loans from Chinese banks, the largest of which are also state-owned.4.25% for one-year loans The slight difference means "the imminent impact of the PBOC's announced reforms to the loan prime rate mechanism will be modest," Liu said in a note. She added in a phone interview that the impact on corporate bond issuance remains to be seen, an area in which multiple factors beyond loan pricing are at play.
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