What Happened: China's central bank unveiled a long-awaited reform to its interest rate mechanism on Aug. 17, The Wall Street Journal reported. Chinese banks will begin using the loan prime rate, which is based on real-world bank lending rates, to price new loans.
Why It Matters: The move by the People's Bank of China is aimed at reducing borrowing costs for businesses struggling with a cooling economy. It will better reflect real market lending rates and enable lenders to quickly respond to the central bank's easing policies.
Background: Data released this week showed China's economy stumbled more sharply than expected at the start of the third quarter, as the intensifying trade war with the United States took a heavier toll on businesses and consumers.
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