China Holds LPR Steady for 14th Consecutive Month, Maintains Freeze Despite Weak Domestic Demand (Update)

LPR Unchanged Despite 4.3% Economic Growth in Q2

AFP Yonhap News

The Chinese government has kept the Loan Prime Rate (LPR), which currently serves as its de facto benchmark interest rate, unchanged for the 14th consecutive month. Although concerns over a domestic economic downturn are growing, it is interpreted that the government chose to maintain its policy stance due to significant internal and external economic uncertainties.

On July 20, the People’s Bank of China, the central bank, announced that the one-year LPR would remain at 3.0%, while the five-year LPR, which serves as the reference rate for mortgage loans, would also be held at 3.5%. In China, every month, 20 leading commercial banks submit their own interest rates—considering funding costs and risk premiums—to the national interbank funding center. The People’s Bank of China then reviews and consolidates these rates before making an official announcement. The resulting LPR effectively operates as the benchmark interest rate in the country.

With external uncertainties mounting, such as the war in the Middle East and the possibility of a shift in U.S. Federal Reserve interest rate policy, the Chinese authorities appear to have maintained the freeze in response. Despite intensifying concerns over weakening domestic demand in China, there has yet to be any indication of an interest rate cut.

China’s economic growth rate for the second quarter of this year, announced earlier, stood at 4.3%, falling short of market expectations. This is the lowest level since the 2.9% recorded in the fourth quarter of 2022, when the economy was severely impacted by the effects of COVID-19. As a result, some observers have pointed out that there remains a possibility of a rate cut in the second half of the year.

This content was produced with the assistance of AI translation services.