China Maintains Historic Low Lending Rates
The one-year loan prime rate (LPR), an essential benchmark for both corporate and household borrowing, remained at 3%. Meanwhile, the five-year LPR, which serves as the standard for mortgage lending, was held steady at 3.5%.
This marks the central bank's second consecutive month without rate changes, following a 10-basis point reduction in May. That move, the first of its kind in 2024, followed a series of rate cuts in 2023, which had kept the rates at record lows since the previous reduction of 25 basis points in October 2024.
The PBoC’s decision comes as China’s economy shows signs of slowing. In the third quarter of 2024, the country’s GDP growth dropped to 4.8%, down from the previous quarter. Key economic indicators, including retail sales, industrial output, and investment figures, have all experienced a deceleration in recent months.
Since 2019, the LPR has acted as the nation’s benchmark interest rate, set by 18 major Chinese banks based on the central bank’s profit margin announcements. The one-year LPR serves as a reference for corporate loans, while the five-year LPR is used as a guideline for real estate loans.
Despite the rate hold, the Chinese yuan showed little movement after the announcement, maintaining a steady trading position around 7.04 against the US dollar.
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