China ‘unsurprisingly’ keeps loan prime rate steady for sixth straight month amid economic recovery

The one-year loan prime rate (LPR) was kept unchanged at 3.85 per cent, while the five-year LPR remained at 4.65 per cent – as widely expected by the market

Official data on Monday showed China’s economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution

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Twenty-five out of 28 traders and analysts, or nearly 90 per cent, in a snap Reuters poll had predicted no change to either the one-year or the five-year loan prime rate (LPR). Photo: Reuters

Published: 10:28am, 20 Oct 2020Updated: 11:37am, 20 Oct 2020

China kept its benchmark lending rate for corporate and household loans steady for the sixth straight month at its October fixing on Tuesday, encouraged by an extended recovery in the world’s second-largest economy from the coronavirus shock.

The one-year loan prime rate (LPR) was kept unchanged at 3.85 per cent, while the five-year LPR remained at 4.65 per cent – as widely expected by the market.

Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages.

Twenty-five out of 28 traders and analysts, or nearly 90 per cent, in a snap Reuters poll had predicted no change to either the one-year or the five-year LPR.

The rate decision came after the People’s Bank of China (PBOC) kept borrowing costs on the medium-term lending facility (MLF) unchanged for the sixth month in a row last week.

The MLF, one of the PBOC’s main tools in managing longer-term liquidity in the banking system, serves as a guide for the LPR.

Recent data pointed to improving economic fundamentals. Official data on Monday showed China’s economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution.