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China's top court clarifies rules on private loans, which greatly
lowers the upper limit of private loan rate
China's top court has modified rules on handling disputes related to
private loans in a bid to meet the need of the country's economic
development, improve vitality of market entities and regulate
private lending activities.
Under the revised guideline, Chinese courts will give legal
protection for individuals and companies providing loans at or below
four times the loan prime rate (LPR), a market-based benchmark
lending rate.
For
example, the current LPR, issued by the People's Bank of China on
July 20, is 3.85 percent, so four times of it is 15.4 percent.
It's a floating or flexible rate, depending on the LPR that is
issued by the PBOC on the 20th of every month.
The
rate is lower than that of the old guideline. Previously, the
legally recognized interest rate on private lending was 24 percent.
The adjustment will
contribute to boosting the high-quality development of small and
medium-sized enterprises, helping them solve the problems in
financing.
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