The People’s Bank of China (PBOC) building in Beijing on December 15, 2022.
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China’s central bank on Wednesday maintained the main benchmark lending rates unchanged, as Beijing assesses the effects of recent stimulus measures.
The People’s Bank of China said it would keep the one-year prime lending rate at 3.1%, and the 5-year LPR at 3.6%.
Market watchers Reuters expected the respondent PBOC to keep lending rates unchanged this month.
“There was no immediate need for an LPR this month,” said Bruce Pang, JLL’s Greater China economist and head of research, adding that Chinese leaders were likely assessing the impact of recent economic stimulus measures.
Record low net interest margins at China’s commercial banks have limited their ability to accept lower lending rates, Pang said, adding that “while another policy rate cut before the end of the year seems unlikely, interest rate cuts in 2025 are likely.”
The 1-year LPR affects most Chinese corporate and household loans, while the 5-year LPR acts as a benchmark for mortgage rates.
Tariff decision It came after a 25 basis point cut 1 year and 5 year LPR last month, and after China economic data for October this underscored the economy’s lackluster momentum, despite the flurry of recent stimulus announcements.
In October, China reported slower-than-expected industrial production and fixed asset investment growth. The annual decline in real estate investment from January to October also intensified compared to a year ago.
Only retail sales beat expectations, with year-on-year growth of 4.8%, indicating that recent stimulus has begun to trickle down to some sectors of the economy.
From the end of September, Chinese authorities have stepped up stimulus announcements to stimulate economic growth, a prolonged property crisis and weak consumer and business sentiment.
At the beginning of the month, the Ministry of Finance a The 5-year fiscal package totals 10 trillion yuan ($1.4 trillion) to address local government debt problems, signaling that more financial aid could come next year.
China’s central bank also planned to maintain accommodative monetary policy, said Governor Pan Gongsheng, who indicated in October that there was still scope for several policy rate cuts by the end of the year.
Morgan Stanley expects China’s growth to slow to around 4% over the next two years and downgraded Chinese stocks to “slightly underweight” in a note dated Sunday, citing a deflationary environment and rising trade tensions as risks.
“We see limited scope for the Chinese government to provide sufficient fiscal stimulus to target consumption and housing,” the analysts said.
Goldman Sachs also estimated that China’s GDP growth could slow to 4.5% in 2025 from 4.9% this year, the bank said in a statement on Monday.
Goldman, however, remained “overweight” on Chinese stocks, predicting a 13% rise in the benchmark CSI 300 index next year.
Donald Trump’s election victory, which is likely to lead to higher tariffs on Chinese exports, has added to uncertainty about China’s export-heavy economy.
