The latest benchmark rates announced by China’s financial authorities have remained unchanged compared to the preceding month.
The loan prime rates (LPR’s) announced by China’s National Interbank Funding Center (全国银行间同业拆借中心) on 20 June were 3.7% for the 1-year LPR and 4.45% for the 5-year LPR, both of which are the same as the LPR’s announced in May.
On 15 June the People’s Bank of China (PBOC) also undertook 200 billion yuan in medium-term lending facility (MLF) operations with a term of one year and a rate of 2.85%, the same as the previous month.
Domestic analysts point out that the lack of change in the MLF rate means that there is no change to the pricing foundation for the LPR in June.
“It doesn’t matter if we’re looking at things form the perspective of the cost of funds for banks or the balance of supply and demand on the credit market, in June where is no impetus for further reduction by quoting banks for the LPR,” said Wang Qing (王青), chief macro-analyst with Golden Credit Rating, to Chinese state-owned media.
In May the five-year LPR already posted a sizeable decline of 15 basis points, falling from 4.6% to 4.45%, just after April saw bank liability costs decline on the back of market-based adjustments to deposit rates and reductions to the required reserve ratio.
“For this reason, no change to the June LPR is in accordance consensus market expectations,” said Wang.
The LPR 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 National Interbank Funding Center serves as the designated publisher of the LPR, and releases the figures at 9:30 am on the 20th of each month, after first collecting quotes from the group of reporting banks and calculating the average of these quotes following exclusion of the lowest and highest quotes.