The bank said in a statement that it cut the prime lending rate (LPR) from 3.85% to 3.8% in November.
It is the first drop in that rate, a benchmark for how much commercial banks can charge their corporate customers, since April 2020.
Previously, the bank this month reduced the amount of money lenders must hold in reserve, which would free up the equivalent of $188 billion into the economy.
“Today’s (Monday’s) cut will immediately hit the floating-rate lending business and should lead to cheaper loans for new customers with fixed rates,” said Mark Williams, chief Asia economist at Capital Economics.
“We expect a cut in the five-year LPR soon, which will make mortgages a little cheaper and help official efforts to support housing demand,” he added.
The reduction came despite inflationary concerns, with factory gate prices rising to levels not seen since the mid-1990s.
China is the only major economy to grow in 2020 despite the pandemic, but its pace declined because of a debt crisis in the real estate sector and localized outbreaks of covid-19.