China holds benchmark lending rates steady at historic lows

(MENAFN) China’s central bank has opted to keep its main lending benchmarks unchanged, maintaining them at historic lows in a move that aligned with broad market expectations, according to official announcements.

The one-year loan prime rate, which influences borrowing costs for businesses and households, remained at 3%, while the five-year rate, commonly used as a reference for mortgage lending, stayed at 3.5%.

The most recent adjustment to these rates took place in May, when authorities lowered them by 10 basis points. That cut followed a prolonged period of stability after a larger 25 basis point reduction implemented in October 2024.

The decision comes as signs point to easing economic momentum. China’s economy expanded by 4.8% in the third quarter, marking a slowdown compared with the previous three-month period. Other major indicators, including consumer spending, factory output, and fixed-asset investment, have also shown weaker performance in recent months, according to available data.

Introduced in 2019, the loan prime rate system is calculated based on rate submissions from 18 commercial banks, reflecting their margins over the central bank’s borrowing costs. It has since functioned as China’s primary benchmark for lending rates.

Within this framework, the one-year rate guides pricing for corporate credit, while the five-year rate serves as the standard for long-term loans, particularly in the property sector.

Following the announcement, the Chinese currency showed little reaction, with the yuan trading steadily at around 7.04 against the US dollar.

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