China’s benchmark lending rates have seen their second consecutive month of decline, as Chinese regulators lend greater support to markets in the wake of the Evergrande Group debt debacle and amidst the ongoing turmoil of the COVID-19 pandemic.
The loan prime rates (LPR) issued by China’s National Interbank Funding Center (全国银行间同业拆借中心) on 20 January were 3.7% for the 1-year LPR, for a decline of 10 basis points compared to the previous month, and 4.60% for the 5-year LPR, for a decline of 5 basis points.
In December China’s LPR’s fell for the first time since the start of the Wuhan lockdown, standing at 3.8% for the 1-year LPR and 4.65% for the 5-year LPR.
While in December the 5-year LPR remained unchanged compared to November, the 1-year LPR for that month marked a decline of 5 basis points compared to the reading of 3.85% for the previous month.
Prior to December China’s LPR’s had remained at the same level for 19 consecutive months since April 2020, when the 1-year LPR fell by 20 basis points compared to the March reading of 4.05% to 3.85%, and the five year LPR fell by 10 basis points from 4.75%.
The loan prime rate (贷款市场报价利率) in China is the lending rate provided by commercial banks to their highest quality customers, and serves as the benchmark for rates provided for other loans.
The latest cut to China’s LPR’s comes just after the Chinese central bank cut rates for its two main open market instruments – the medium-term lending facility (MLF) and reverse repo – by 10 basis points in 17 January, for the first MLF rate cut since April 2020.