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.