China’s Real Borrowing Costs Are Surging Near Highest Since 2016
- Lending rates in real terms climb as consumer prices fall
- Narrow room for aggressive rate cut puts focus on fiscal moves
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China’s real borrowing costs are expected to stay high in 2024 as deflation pressures linger, posing yet another threat to growth in the world’s second-biggest economy.
Calculations by Bloomberg News show those rates — adjusted for inflation and reflective of the actual cost of borrowing funds — have topped 4% and may even be near 5%, which would be the highest level since 2016. That’s because consumer and producer prices have fallen at a much faster pace than the country’s average loan rate, a figure largely based on changes in benchmark rates set by the People’s Bank of China and major lenders.