China Economy

China keeps lending benchmark loan prime rate steady for 7th straight month as expected

Key Points
  • China left its benchmark lending rate for corporate and household loans unchanged for a seventh straight month at its November fixing on Friday, matching market expectations.
  • The one-year loan prime rate (LPR) was kept unchanged at 3.85%, while the five-year LPR remained at 4.65%.
  • Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages.
A man arranges renminbi banknotes in Fuyang in central China's Anhui province Friday, March 13, 2020.
Feature China | Barcroft Media | Getty Images

China left its benchmark lending rate for corporate and household loans unchanged for a seventh straight month at its November fixing on Friday, matching market expectations.

The one-year loan prime rate (LPR) was kept unchanged at 3.85%, while the five-year LPR remained at 4.65%.

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

Thirty-one out of 36 traders and analysts in a snap Reuters poll predicted no change in either the one-year or five-year LPRs, although four predicted an increase.

The rate decision came after the People's Bank of China (PBOC) kept borrowing costs on the medium-term lending facility (MLF) unchanged for a seventh straight month this week.

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

The LPR is a lending reference rate set monthly by 18 banks. The PBOC revamped the mechanism to price LPR in August 2019, loosely pegging it to the MLF rate.