China’s Loan Prime Rates Hold Steady in September

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China’s benchmarked interest rate has held steady in September, after posting a sizeable decline in the month of August in response to lacklustre credit extension.

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 September were 3.65% for the 1-year LPR and 4.3% for the 5-year LPR, both the same as the prints for the previous month as well as in line with market expectations.

In August both the 1-year and 5-year LPR’s saw declines, after the Chinese central bank reduced its policy rates for open market instruments in a bid to buoy tepid lending from July.

The 1-year LPR fell 5 basis points in August compared to the print of 3.7% in July, while the 5-year LPR saw a decline of 15 basis points compared to the print of 4.45% last month.

Chinese analysts expect borrowing costs for the real economy to continue to decline, despite the LPR holding steady in September.

Wang Qing (王青), chief macro-analyst with Golden Credit Rating, expects interest rates for new enterprise loans to fall to new historic lows in September, and mortgage rates to continue to decline.