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China leaves benchmark lending rates unchanged

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dpa-AFX/GNA – China on Monday left its benchmark lending rates unchanged, as widely expected. The one-year loan prime rate was retained at 3.85 per cent and the five-year loan prime rate was maintained at 4.65 per cent.

The one-year and five-year loan prime rates were last lowered in April 2020. The one-year loan prime rate was cut by 20 basis points and five-year rate by 10 basis points in April.

The inaction did not come as a surprise since the People’s Bank of China had not adjusted the rate on its medium-term lending facility this month as it did ahead of the past three LPR moves, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said.

The scope for hiking rates this year is diminishing. The PBOC appears to favor quantitative controls on lending instead, they noted. Either way, credit conditions are set to be less favorable this year.

The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This new lending rate replaced the central bank’s traditional benchmark lending rate in August 2019.

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