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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. 

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