China Maintains Benchmark Lending Rates for Seventh Consecutive Month

In a move that aligns with market expectations, China has kept its benchmark loan prime rates (LPRs) steady for the seventh month in a row as of December 22. Authorities appear to be taking a measured approach, indicating they are not pressed to implement additional monetary easing as the second-largest economy is on track to meet its annual growth targets. Analysts suggest that the central bank's cross-cyclical policy adjustments and the low profit margins of financial institutions may allow for a delay in stimulus measures until next year. The one-year LPR remains at 3.00%, while the five-year LPR holds steady at 3.50%. All 25 participants surveyed by Reuters last week expected no changes to these rates. At this month’s Central Economic Work Conference (CEWC), Chinese officials reaffirmed their commitment to a proactive fiscal policy in 2024, aimed at stimulating consumption and investment to sustain a growth target of approximately 5%. However, economic activity slowed in November, with declines in factory output and retail sales amid ongoing challenges in the property market, along with weaker-than-anticipated household borrowing. Analysts at Barclays and Nomura commented on the expectation for fiscal measures to counteract the economic slowdown, with potential cuts to interest rates and reserve requirements anticipated in 2026.