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China’s Benchmark Lending Rates Remain Unchanged

1 Mins read

China’s benchmark lending rates have remained unchanged, in line with market expectations. This decision follows the recent hold on policy rates, signaling a stabilization in the world’s second-largest economy as evidenced by positive August data.

The one-year loan prime rate (LPR) stands steady at 3.45%, while the five-year LPR remains unchanged at 4.2%, according to the People’s Bank of China. These rates are determined monthly based on the interest rates charged by 18 designated commercial banks to their top-tier clients.

The decision to keep rates unchanged was widely anticipated after the central bank maintained its key policy rate, known as the medium-term lending facility, last week. The one-year LPR has a significant impact on both new and existing loans in China, while the five-year LPR influences mortgage rates.

China had previously lowered the one-year benchmark lending rate by 10 basis points in August, but decided to maintain the five-year rate. This move reflects the challenges posed by a weakened yuan and banks’ reluctance to reduce lending rates due to shrinking profit margins.

In a separate move last week, the People’s Bank of China reduced the reserve requirement ratio (RRR) for banks for the second time this year. By lowering the RRR by 0.25 percentage point, the central bank aimed to inject approximately 500 billion yuan ($68.52 billion) into the country’s financial system to support economic growth.

Overall, these measures indicate China’s commitment to maintaining stability in its economy and ensuring continued growth in challenging times.

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