The institution’s monthly update on the official portal indicated that the reference rate for credits (LPR) for one year will remain at the mentioned level for at least another month.
Established in 2019 as a benchmark for interest rates, the indicator sets the cost of new credits, generally for companies, and for variable-interest credits pending repayment.
The calculation is based on the pricing contributions from a series of banks, including smaller lenders that typically face higher financing costs and increased bad debt exposure, aiming to reduce borrowing costs and support the “real economy.”
The central bank also announced today that the LPR for five years or more, a reference for mortgage loans, will remain at 3.5%, in line with expert forecasts.
The last interest rate reduction in China occurred last May, when the institution cut rates by 10 basis points: the one-year LPR from 3.1% to 3%, and the five-year or more LPR from 3.6% to 3.5%.
The decision was anticipated by analysts given the context for the world’s second-largest economy, which may decide on further cuts throughout the remainder of the year.
Beyond the uncertainty caused by trade disputes with the United States, low domestic and international demand, coupled with deflation risks, insufficient stimuli, a prolonged real estate crisis, or lack of confidence from consumers and the private sector are cited by analysts as reasons for a less bright recovery of the Chinese economy than expected, following the years of “zero-COVID” policy.
