The People’s Bank of China, in its monthly update, announced that the Loan Prime Rate (LPR) will remain unchanged for at least another month.
Established in 2019 as a benchmark for interest rates, this indicator is used to determine the pricing of new loans—primarily aimed at enterprises—and variable-rate loans that are currently being repaid.
The LPR is calculated based on the pricing inputs from a consortium of banks, which includes smaller lenders often facing higher financing costs and greater exposure to non-performing loans. Its primary aim is to reduce loan costs and support the “real economy.”
The last reduction occurred in October, when the central bank lowered the rate by 25 basis points (or 0.25 percentage points), from 3.35%.
The central bank also stated that the interest rate for loans exceeding five years—a reference for mortgage loans—will stay at 3.6%, aligning with analysts’ predictions. Similarly, the last decrease was in October, by 25 basis points, from 3.85%.
Despite the Gross Domestic Product meeting its official target with a 5% growth in 2024, the economic situation has not yet convinced either Beijing or Chinese consumers.
In December, the authorities announced the first change in monetary policy in 14 years, shifting from a “cautious” stance to a “moderately flexible” approach. This change implies the possibility of a larger deficit or further interest rate reductions.
Amid an increasingly complex international context, following Donald Trump’s return to the White House, Chinese authorities reiterated in March their goal for an economic growth rate of about 5% by 2025. To achieve this target, they have announced measures such as expanding the deficit or adopting a “more proactive” fiscal policy to provide “sustained and more effective” support.
