Central bank cuts interest rates, moving to put more pep into the economy

China’s central bank cut key interest rates in a surprise move yesterday aimed at injecting new life into its ailing property sector, while the ruling Communist Party released details of a top-level meeting focused on strategies for revving up the slowing economy.

The People’s Bank of China cut the five-year loan prime rate, which is a benchmark for mortgages, by 10 basis points to 3.85% from 3.95%. The one-year loan prime rate, or LPR, was reduced to 3.35% from 3.45%.

The expanded summary of the party’s plenum last week included ambitious targets for accomplishing leader Xi Jinping’s goal of making China a “high-standard socialist market economy in all respects” by 2035.

The lengthy document, 50 pages in English, promises to beef up social welfare such as pensions, improve the tax system and protect private property rights. Rural migrants should have the same access to public services as long-term city dwellers, it says.

It also pledges equal market access and support for private enterprises and state-owned companies and establishing better “international coordination” of economic policies.

The document released Sunday was more detailed than a communique released after the party meeting ended last week. But the actual reforms and laws it outlined in what amounts to a policy roadmap will come much later.

“We think these measures, if well implemented promptly, should help improve resource allocation, contain financial risks, unleash some growth potential, and underpin investors’ confidence, while the actual implementation and policy clarity and sustainability will be the key,” UBS economists Nina Zhang and Tao Wang said in a report.

The world’s second-largest economy has struggled to regain momentum since the COVID-19 pandemic, and a slump in the property market has been a major hindrance. Economic growth fell to 4.7% in the last quarter, but remained at the government’s target rate of about 5% for the first half of the year.

The housing market cooled after regulators cracked down on excessive borrowing by developers, unleashing a chain reaction that has pulled sales and prices lower and hit many other parts of the economy, such as construction, building materials and home appliances.

Regulators have been fine tuning policy as pressures have mounted in the economy and markets. Investors appear to be hungry for more aggressive action: Yesterday, the Shanghai Composite index was down 1% even after the People’s Bank of China announced several moves to relieve pressure on banks and property developers.

The central bank also reduced collateral requirements for its medium-term lending facility for banks. It said that was intended to ease pressure on the bond market.

The PBOC also reduced the interest rate on its purchases of securities from commercial banks through bidding, with a promise to sell them back in the future. The rate on 7-day “reverse repos” was cut to 1.7% from 1.8% to help put more cash into the banking system, it said.

Chinese markets had a mixed reaction, with Hong Kong’s Hang Seng jumping 0.8% on buying of heavyweight technology shares on expectations that policies favoring advanced technology and innovation will favor sectors like electric vehicles, computer chips and new materials.

Video games maker Tencent rose 2.4% while e-commerce giants Alibaba and JD.com rose 1.1% and 1.2%, respectively.

But many property developers’ shares languished. Country Garden dropped 5.7%, Hongkong Land Holdings fell 3.2% and China Vanke fell 3%. ELAINE KURTENBACH, MDT/AP