An American Research agency has uncovered a monumental shift in China's lending strategy from 2000 to 2021. Chinese financial institutions have reportedly paid a staggering $1.34 trillion into developing nations more eye-catching has been its radical shift from traditional infrastructure Investments to what's been called rescue lending.

China's changing role from investor to a rescue lender

Amid efforts to revive&nbsp;its sluggish economy, the second-largest in the world, China has slashed key benchmark lending rates, a move taken for the second time this year, media reports said.&nbsp;The People's Bank of China (PBOC) took action on Monday by decreasing the one-year loan prime rate (LPR) by 10 basis points from 3.55 per cent to 3.45 per cent.

Notably, there was no change to the five-year rate, which remains at 4.20 per cent. This move to lower the one-year benchmark lending rate was widely expected.

Days back, China, in an unexpected turn of events, cut down key policy rates, a decision which clearly indicated an escalated effort by Chinese authorities to implement monetary easing measures. This development sparked speculation about a potential cut in China's lending benchmark loan prime rate (LPR), which turned out to be the case on Monday.&nbsp;

Also Read | <a href="https://www.wionews.com/world/ecowas-rejects-niger-coup-leaders-pitch-to-restore-civilian-rule-in-three-years-627364">ECOWAS rejects Niger coup leader's pledge to restore civilian rule in three years</a>

However, economists were surprised by the absence of cuts to the five-year rate, media reports said.&nbsp;

<h2>What were the expectations?&nbsp;&nbsp;</h2>

A majority of experts surveyed by Reuters had foreseen a 15-basis-point reduction in the one-year rate, which significantly influences new and existing loans. Moreover, these analysts had anticipated a decrease of at least 15 basis points in the five-year rate, which serves as a reference rate for mortgages. The surprise absence of action on the five-year rate left many puzzled.

<h2>Economic factors driving the decision</h2>

Credit growth decline and escalating deflation concerns in July have led to the need for additional monetary easing measures to counteract the economic slowdown.&nbsp;

Also Read | <a href="https://www.wionews.com/world/south-africas-president-ramaphosa-calls-for-unsc-reform-sets-pitch-for-brics-expansion-ahead-of-summit-627366">South Africa's President Ramaphosa calls for UNSC reform, sets pitch for BRICS expansion ahead of summit</a>

The market has also been affected by apprehensions about potential defaults from housing developers and payment defaults by private wealth management firms, causing a decrease in financial market confidence.

Most recently, real estate behemoth Evergrande has filed for bankruptcy protection in the United States amid the escalating real estate turmoil in China.&nbsp;Tommy Wu, Senior China economist at Commerzbank, said,&nbsp;"All of these add to the urgency that policymakers need to act fast before consumer and business confidence deteriorate sharply."&nbsp;

<h2>MLF rates&nbsp;</h2>

Earlier, PBOC reduced the interest rate for one-year medium-term lending facility (MLF) loans totalling 401 billion yuan ($55.25 billion) provided to certain financial institutions. The rate was lowered by 15 basis points, settling at 2.50 per cent as opposed to the previous 2.65 per cent.

Watch | Pakistan: President Arif Alvi denies signing of key laws

<div class="ui-state-default" contenteditable="false">
<div class="twitter-block" draggable="false">
<div class="videoWrapper trancodeVideo"><iframe allowfullscreen="" autoplay="1" class="includeVideo" frameborder="0" height="350" src="https://www.wionews.com/videos/pakistan-president-arif-alvi-denies-signing-of-key-laws-627347/embed" style="width:100%;max-width:560px;" width="560"></iframe></div>
</div>
<a class="close-mark close-div" href="#" id="jqclosemark">×</a></div>

In an online statement, the PBOC clarified that this infusion of funds was aimed at mitigating various factors, including tax payments, with the intention of maintaining a suitable level of liquidity within the banking system.

(With inputs from agencies)

<div class="ui-state-default" contenteditable="false">
<div class="twitter-block" draggable="false">
WATCH WION LIVE HERE

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="350" loading="”lazy”" src="https://www.wionews.com/live-tv/embed?autoplay=1&amp;mute=1" width="100%"></iframe>

You can now write for wionews.com and be a part of the community. Share your stories and opinions with us <a href="https://www.wionews.com/content-contribution-registration-form">here</a>.
</div>
<a class="close-mark close-div" href="#" id="jqclosemark">×</a></div>

&nbsp;

 
&nbsp;

 
&nbsp;

Amid efforts to revive its sluggish economy, the second-largest in the world, China has slashed key benchmark lending rates, a move taken for the second time this year, media reports said.

Amid efforts to revive its sluggish economy, the second-largest in the world, China has slashed key benchmark lending rates, a move taken for the second time this year, media reports said. The People's Bank of China (PBOC) took action on Monday by decreasing the one-year loan prime rate (LPR) by 10 basis points from 3.55 per cent to 3.45 per cent. Notably, there was no change to the five-year rate, which remains at 4.20 per cent. This move to lower the one-year benchmark lending rate was widely expected. Days back, China, in an unexpected turn of events, cut down key policy rates, a decision which clearly indicated an escalated effort by Chinese authorities to implement monetary easing measures. This development sparked speculation about a potential cut in China's lending benchmark loan prime rate (LPR), which turned out to be the case on Monday. Also Read | ECOWAS rejects Niger coup leader's pledge to restore civilian rule in three years However, economists were surprised by the absence of cuts to the five-year rate, media reports said. What were the expectations? A majority of experts surveyed by Reuters had foreseen a 15-basis-point reduction in the one-year rate, which significantly influences new and existing loans. Moreover, these analysts had anticipated a decrease of at least 15 basis points in the five-year rate, which serves as a reference rate for mortgages. The surprise absence of action on the five-year rate left many puzzled. Economic factors driving the decision Credit growth decline and escalating deflation concerns in July have led to the need for additional monetary easing measures to counteract the economic slowdown. Also Read | South Africa's President Ramaphosa calls for UNSC reform, sets pitch for BRICS expansion ahead of summit The market has also been affected by apprehensions about potential defaults from housing developers and payment defaults by private wealth management firms, causing a decrease in financial market confidence. Most recently, real estate behemoth Evergrande has filed for bankruptcy protection in the United States amid the escalating real estate turmoil in China. Tommy Wu, Senior China economist at Commerzbank, said, "All of these add to the urgency that policymakers need to act fast before consumer and business confidence deteriorate sharply." MLF rates Earlier, PBOC reduced the interest rate for one-year medium-term lending facility (MLF) loans totalling 401 billion yuan ($55.25 billion) provided to certain financial institutions. The rate was lowered by 15 basis points, settling at 2.50 per cent as opposed to the previous 2.65 per cent. Watch | Pakistan: President Arif Alvi denies signing of key laws × In an online statement, the PBOC clarified that this infusion of funds was aimed at mitigating various factors, including tax payments, with the intention of maintaining a suitable level of liquidity within the banking system. (With inputs from agencies) WATCH WION LIVE HERE You can now write for wionews.com and be a part of the community. Share your stories and opinions with us here. ×

China slashes key benchmark lending rates to revive sluggish economy

One of the world’s most distinctive financers, R Thyagarajan, who founded the Shriram Group, has impacted several lives by lending to low-income borrowers.

Content with his small house and his $5,000 car, Thyagarajan gave away a major chunk of his wealth to his employees. A pioneer in providing loans to India’s poor for trucks, tractors, and other vehicles, Thyagarajan turned Shriram into a conglomerate that offers services ranging from stockbroking to insurance.

Shriram’s share prices recorded a record high in July after rising by over 35 per cent this year -- more than four times as much as India’s benchmark stock index.

Now 86, Thyagarajan has taken up an advisory role.

In an interview with Bloomberg, he claimed that he got into the business to prove that lending to those without credit records or steady incomes was not unsafe as it is thought to be. He maintained that his method of doing business is relatively ordinary.

“I’m a bit of a leftist,” Bloomberg quoted Thyagarajan as saying in Chennai, where he founded the company in 1974. “I was never enthusiastic about making life pleasanter for people who already have a good life.” Rather, I “wanted to take away some unpleasantness in the lives of people who are getting into problems.”

Thyagarajan’s career illustrates the unrealised potential in the country with the largest population in the world, where an increasing number of its 1.4 billion citizens aim to join the expanding middle class.

However, roughly 25 per cent of Indians lack access to established financial systems. The World Bank estimates that one in three people, who have bank accounts in India, never use them.

Thyagarajan stated that lending to the poor is a sort of socialism. But he has attempted to show that the business can be secure and successful by providing a less expensive alternative to the heavy rates accessible to the unbanked. By doing so, he has convinced other businesses to lower borrowing costs.

The industry is now quite profitable. There are around 9,400 so-called shadow banks in India, most of which provide financial services to borrowers who are passed over by traditional lenders.

Building an Empire

For a man who was raised in a wealthy family in the state of Tamil Nadu, surrounded by servants, founding a lending company with socialist ideals may seem like an odd career decision. However, Thyagarajan asserted that he has always had an analytical and egalitarian mindset.

Before spending three years at the Indian Statistical Institute in Kolkata, he completed his undergraduate and graduate studies in mathematics in Chennai.

He began a 20-year career in finance as an employee at New India Assurance Co., one of India’s leading insurers, in 1961. It included employment at reinsurance broker JB Boda &amp; Co. and local lender Vysya Bank.

People in Chennai approached him along the route looking for money to purchase used trucks, and he provided loans to them from his inheritance. That side business eventually turned into his primary venture. He co-founded Shriram Chits with friends and family when he was 37.

The unbanked frequently relied on “chit funds”, a form of group savings where each participant contributes a certain amount each month. One investor receives a portion of the amount each month until everyone has gotten a certain amount. The funds are used to pay for farm equipment, tuition, or other substantial purchases.

Thyagarajan established additional businesses over time, and Shriram eventually expanded to include more than 30 companies.

Living Modestly

Tyagarajan drove a Hyundai hatchback for many years. He also does not own a mobile phone, which he regards as a distraction.

All of the tycoon’s shareholdings in Shriram firms were transferred to the Shriram Ownership Trust, which was established in 2006. Beneficiaries of the perpetual trust include 44 group executives. When executives retire, they take millions of dollars with them.

The entire worth of the trust’s holdings exceeds $750 million and has increased in recent years.

Thyagarajan told Bloomberg that he did not need the money then or now, and that he enjoys simple things.

Thyagarajan’s only regret -- the manner in which he gave away his wealth. He said he would have split the bounty if he had known how profitable Shriram would become.

“I did not imagine that so much money was going to be distributed to so few,” he says. “I’m not very happy about it. But it’s okay. I’m not very sad either,” he said in the interview.

(With inputs from agencies)

WATCH WION LIVE HERE

<iframe allow="accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture" allowfullscreen="" frameborder="0" height="350" src="https://www.wionews.com/live-tv/embed?autoplay=1&amp;mute=1" width="100%"></iframe>

One of the world’s most distinctive financers, R Thyagarajan, who founded the Shriram Group, has impacted several lives by lending to low-income borrowers. Content with his small house and his $5,000 car, Thyagarajan gave away a major chunk of his wealth to his employees.

One of the world’s most distinctive financers, R Thyagarajan, who founded the Shriram Group, has impacted several lives by lending to low-income borrowers. Content with his small house and his $5,000 car, Thyagarajan gave away a major chunk of his wealth to his employees. A pioneer in providing loans to India’s poor for trucks, tractors, and other vehicles, Thyagarajan turned Shriram into a conglomerate that offers services ranging from stockbroking to insurance. Shriram’s share prices recorded a record high in July after rising by over 35 per cent this year -- more than four times as much as India’s benchmark stock index. Now 86, Thyagarajan has taken up an advisory role. In an interview with Bloomberg, he claimed that he got into the business to prove that lending to those without credit records or steady incomes was not unsafe as it is thought to be. He maintained that his method of doing business is relatively ordinary. “I’m a bit of a leftist,” Bloomberg quoted Thyagarajan as saying in Chennai, where he founded the company in 1974. “I was never enthusiastic about making life pleasanter for people who already have a good life.” Rather, I “wanted to take away some unpleasantness in the lives of people who are getting into problems.” Thyagarajan’s career illustrates the unrealised potential in the country with the largest population in the world, where an increasing number of its 1.4 billion citizens aim to join the expanding middle class. However, roughly 25 per cent of Indians lack access to established financial systems. The World Bank estimates that one in three people, who have bank accounts in India, never use them. Thyagarajan stated that lending to the poor is a sort of socialism. But he has attempted to show that the business can be secure and successful by providing a less expensive alternative to the heavy rates accessible to the unbanked. By doing so, he has convinced other businesses to lower borrowing costs. The industry is now quite profitable. There are around 9,400 so-called shadow banks in India, most of which provide financial services to borrowers who are passed over by traditional lenders. Building an Empire For a man who was raised in a wealthy family in the state of Tamil Nadu, surrounded by servants, founding a lending company with socialist ideals may seem like an odd career decision. However, Thyagarajan asserted that he has always had an analytical and egalitarian mindset. Before spending three years at the Indian Statistical Institute in Kolkata, he completed his undergraduate and graduate studies in mathematics in Chennai. He began a 20-year career in finance as an employee at New India Assurance Co., one of India’s leading insurers, in 1961. It included employment at reinsurance broker JB Boda & Co. and local lender Vysya Bank. People in Chennai approached him along the route looking for money to purchase used trucks, and he provided loans to them from his inheritance. That side business eventually turned into his primary venture. He co-founded Shriram Chits with friends and family when he was 37. The unbanked frequently relied on “chit funds”, a form of group savings where each participant contributes a certain amount each month. One investor receives a portion of the amount each month until everyone has gotten a certain amount. The funds are used to pay for farm equipment, tuition, or other substantial purchases. Thyagarajan established additional businesses over time, and Shriram eventually expanded to include more than 30 companies. Living Modestly Tyagarajan drove a Hyundai hatchback for many years. He also does not own a mobile phone, which he regards as a distraction. All of the tycoon’s shareholdings in Shriram firms were transferred to the Shriram Ownership Trust, which was established in 2006. Beneficiaries of the perpetual trust include 44 group executives. When executives retire, they take millions of dollars with them. The entire worth of the trust’s holdings exceeds $750 million and has increased in recent years. Thyagarajan told Bloomberg that he did not need the money then or now, and that he enjoys simple things. Thyagarajan’s only regret -- the manner in which he gave away his wealth. He said he would have split the bounty if he had known how profitable Shriram would become. “I did not imagine that so much money was going to be distributed to so few,” he says. “I’m not very happy about it. But it’s okay. I’m not very sad either,” he said in the interview. (With inputs from agencies) WATCH WION LIVE HERE

Meet R Thyagarajan, the man who donated his wealth to employees

The International Monetary Fund (IMF) on Wednesday announced that it would extend a bailout package worth $6&nbsp;billion to help Pakistan restore an inclusive and sustainable growth of its plunging economy.

In a video shared on its official Twitter page, the global money lender said that large deficits in the past, the high cost to buy a rupee, and lack of reforms have undermined the growth of the cash-strapped economy.

<div class="ui-state-default" contenteditable="false">
<div class="twitter-block" draggable="false">
<blockquote class="twitter-tweet" data-lang="en">
The IMF is providing $6 billion USD to help <a href="https://twitter.com/hashtag/Pakistan?src=hash&amp;ref_src=twsrc%5Etfw">#Pakistan</a> restore inclusive and sustainable growth. What are the program priorities? Watch the video to learn more. <a href="https://t.co/XGfEjBGUgF">pic.twitter.com/XGfEjBGUgF</a>
— IMF (@IMFNews) <a href="https://twitter.com/IMFNews/status/1174277177711501312?ref_src=twsrc%5Etfw">September 18, 2019</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
<a class="close-mark close-div" href="#" id="jqclosemark">×</a></div>

In addition, significant government borrowing had further made it difficult to pay down the debt, added the IMF.

The global lending agency said that "to restore strong and sustainable growth, Pakistan has developed a bold 3-year program to first, allow the market to drive a fair value of the rupee helping to restore competitiveness and support exports; second, reducing debt by ensuring that more people pay taxes and the rich pay their fair share; and third, protecting vulnerable groups by increasing spending on healthcare and education."

It said the loan would further accelerate reforms to encourage investment to help companies thrive and create jobs.

"This will help Pakistan's economy reach its full potential," the global money lender wrote on Twitter.

To support its ailing economy, the country had signed a similar $6 billion loan from the IMF earlier this year.

On Monday, an eight-member IMF delegation arrived in Islamabad to review Pakistan's economic progress two months after signing the deal with focus on the country's failure to achieve the set revenue collection target, Arab News reported.

Pakistan's trade deficit shrank by nearly 38 per cent in the first two months of the current fiscal year, driven largely by a decline in imports of non-essential luxury items.

The constant decline in the trade deficit showed that imports have also plummeted despite a meagre growth in exports.

Prime Minister Imran Khan, who was elected on an anti-corruption plank and a pledge to end austerity measures, had vowed to improve the depleting economic situation of the cash-strapped country.

In fact, the opposite has happened. In reality, prices of gas and oil products and electricity in Pakistan have risen considerably, burning a hole in common man's pocket.

The International Monetary Fund (IMF) on Wednesday announced that it would extend a bailout package worth $6 billion to help Pakistan restore an inclusive and sustainable growth of its plunging economy.

The International Monetary Fund (IMF) on Wednesday announced that it would extend a bailout package worth $6 billion to help Pakistan restore an inclusive and sustainable growth of its plunging economy. In a video shared on its official Twitter page, the global money lender said that large deficits in the past, the high cost to buy a rupee, and lack of reforms have undermined the growth of the cash-strapped economy. The IMF is providing $6 billion USD to help #Pakistan restore inclusive and sustainable growth. What are the program priorities? Watch the video to learn more. pic.twitter.com/XGfEjBGUgF — IMF (@IMFNews) September 18, 2019 × In addition, significant government borrowing had further made it difficult to pay down the debt, added the IMF. The global lending agency said that "to restore strong and sustainable growth, Pakistan has developed a bold 3-year program to first, allow the market to drive a fair value of the rupee helping to restore competitiveness and support exports; second, reducing debt by ensuring that more people pay taxes and the rich pay their fair share; and third, protecting vulnerable groups by increasing spending on healthcare and education." It said the loan would further accelerate reforms to encourage investment to help companies thrive and create jobs. "This will help Pakistan's economy reach its full potential," the global money lender wrote on Twitter. To support its ailing economy, the country had signed a similar $6 billion loan from the IMF earlier this year. On Monday, an eight-member IMF delegation arrived in Islamabad to review Pakistan's economic progress two months after signing the deal with focus on the country's failure to achieve the set revenue collection target, Arab News reported. Pakistan's trade deficit shrank by nearly 38 per cent in the first two months of the current fiscal year, driven largely by a decline in imports of non-essential luxury items. The constant decline in the trade deficit showed that imports have also plummeted despite a meagre growth in exports. Prime Minister Imran Khan, who was elected on an anti-corruption plank and a pledge to end austerity measures, had vowed to improve the depleting economic situation of the cash-strapped country. In fact, the opposite has happened. In reality, prices of gas and oil products and electricity in Pakistan have risen considerably, burning a hole in common man's pocket.

International Monetary Fund to extend $6 billion bailout package to restore Pakistan's plunging economy

The World Bank plans to raise lending to India by about $1 billion every year for the next five years from the current $3 billion to $3.5 billion, its country director to India said on Wednesday.

The lending will be mainly for infrastructure projects, Junaid Ahmad said.

Last November, India jumped into 100th place on the World Bank&#39;s ranking of countries by Ease of Doing Business for the first time in its report for 2018, up about 30 places, driven by reforms in access to credit, power supplies and protection of minority investors.

The lending will be mainly for infrastructure projects

The World Bank plans to raise lending to India by about $1 billion every year for the next five years from the current $3 billion to $3.5 billion, its country director to India said on Wednesday. The lending will be mainly for infrastructure projects, Junaid Ahmad said. Last November, India jumped into 100th place on the World Bank's ranking of countries by Ease of Doing Business for the first time in its report for 2018, up about 30 places, driven by reforms in access to credit, power supplies and protection of minority investors.

World Bank plans to boost lending to India by $1 billion every year for next 5 years: India head

lending

Lending, News on Lending, stories on Lending, articles on Lending, Lending stories at Wion, Lending news, Lending latest news