China several interest rate reforms over the past month which included;

1. Requiring commercial lenders to use the loan prime rate (LPR) instead of the PBOC benchmark lending rate as a reference point.
2. Increased the number of FIs that participate in the LPR quotation submissions – from 10 to 18.
3. Setting the LPR once a month instead of daily.

Our thoughts: The government has for some time tried to align its interest rate mechanisms to be more in-line with that of other major central banks who mainly adjust rates on a short end of the curve with varying degrees of success. The latest move will serve as a welcome for a slowing economy with credit expansions and lower effective borrowing costs.