China holds steady on record lending rates amid economic concerns

8/20/2024 5:52:50 AM

(MENAFN) China's central bank decided to keep its benchmark lending rates unchanged on Tuesday, a move widely anticipated by market observers. The People's Bank of China maintained the one-year loan prime rate at 3.35 percent and the five-year loan prime rate at 3.85 percent. These rates are crucial in China's financial system, with the one-year rate serving as a reference for most new and existing loans, while the five-year rate plays a significant role in determining mortgage costs. The decision aligns with predictions from a poll conducted this week, in which 37 market participants unanimously expected no changes to the rates.

This decision follows China's unexpected move in July to cut key short- and long-term interest rates, the first such action in nearly a year. That earlier rate cut was seen as a clear signal from policymakers of their intention to stimulate economic growth amid slowing momentum. However, despite these efforts, China's economic challenges persist. Last month, bank lending in the country dropped more than expected, reaching its lowest level in nearly 15 years. This decline was driven by weak demand for credit and seasonal factors, raising concerns about the effectiveness of current monetary policies. As a result, there is growing speculation that the central bank may need to implement further monetary easing measures to address the underlying issues in the economy and to support sustainable growth.

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