China resists loan rate cuts, but changes ‘still likely’ as economy struggles under zero-Covid

China’s one-year loan prime rate (LPR) remained unchanged at 3.7 per cent, the People’s Bank of China (PBOC) said on Monday

The five-year LPR, which is the reference for mortgages, also remained unchanged at 4.45 per cent

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China’s one-year loan prime rate (LPR) and five-year LPR, which is the reference for mortgages, remained unchanged, the People’s Bank of China (PBOC) said on Monday. Photo: AFP

Published: 9:22am, 20 Jun 2022Updated: 1:16pm, 21 Jun 2022

China kept its benchmark lending rate unchanged on Monday, again resisting the chance to follow in the footsteps of the US Federal Reserve despite the challenges facing its economy.

The one-year loan prime rate (LPR) – on which most new and outstanding loans are based – remained at 3.7 per cent at the June fixing, according to the People’s Bank of China.

And the five-year LPR – which is a reference rate for mortgages – also remained at 4.45 per cent having been lowered from 4.6 per cent in May. This had represented the largest cut on record and the second this year after the rate was also reduced from 4.65 per cent in January.

China’s economy improved marginally in May, when Premier Li Keqiang released a 33-point rescue package and ordered local cadres to thoroughly implement the measures to avoid an economic contraction in the second quarter.

With the weak economic recovery, rate cuts in the coming months are still likely as we expect the economic recovery to be slow under the zero-Covid policy

Iris Pang

However, monthly retails sales growth remained negative last month, indicating that there is still a long way to go to achieve the country’s ambitious growth target of “around 5.5 per cent”.

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