China’s One-year Loan Prime Rate Falls 10 Basis Points

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One of China’s key interest rate benchmarks has seen a decline in February amidst efforts by Beijing to mitigate the economic impacts of the coronavirus outbreak.

On 20 February the Na­tional In­ter­bank Fund­ing Cen­ter announced a one-year loan prime rate (LPR) of 4.05%, for a decline of 10 basis points compared to January, and a five-year LPR of 4.75%, for a decline of 5 basis points.

Analysts previously anticipated a reduction in the LPR of around 10 basis points amidst Beijing’s push for banks to give greater support to the Chinese economy, in order to mitigate the impacts of the coronavirus outbreak.

The LPR is the lend­ing rate pro­vided by Chinese com­mer­cial banks to their high­est qual­ity cus­tomers, and serves as the bench­mark for the rates pro­vided for other loans.

The LPR is reported once a month on the 20th of each month by the National Interbank Funding Center, and is comprised of a one-year and five-year rate.

At pre­sent the LPR re­port­ing group is com­prised of 18 com­mer­cial banks in China, in­clud­ing an orig­i­nal core group of 10 na­tional banks, plus two mu­nic­i­pal com­mer­cial banks, two rural vil­lage com­mer­cial banks, two for­eign in­vested banks and two pri­vately op­er­ated banks.

PBOC has steadily sought to increase the influence of the LPR since August 2019, when it called for Chinese banks to make it the key benchmark for new loans.

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