ع
The People’s Bank of China authorized the National Interbank Funding Center to publish the latest loan prime rates on September 20, keeping both the one-year and over-five-year tenors at their existing levels. This decision aligns with a Reuters poll in which all 21 market participants had forecast no change to either rate. The one-year LPR acts as the main benchmark for corporate and household borrowing while the five-year rate influences most mortgage pricing across the country.
Xinhua reported that the rates have now stayed fixed for 16 consecutive months since a 10-basis-point cut in June 2025, a period during which the central bank has monitored evolving domestic and external conditions. Wen Bin, chief economist at China Minsheng Bank, attributed the hold in part to continued economic resilience, including robust export performance, a pickup in consumer and producer price indices, and accelerated industrial output growth recorded in August. Lending rates have remained relatively low, with the weighted average interest rate on newly issued corporate loans falling below 3 percent in August 2026, about 0.2 percentage point lower than a year earlier, while rates on new personal housing loans held near 3.1 percent.
China Minsheng Bank data shows these subdued borrowing costs have continued to support the real economy even without further reductions in the benchmark rates. The over-five-year LPR in particular has remained a focus for the property sector, where demand for credit has stayed soft amid ongoing adjustments. PBOC Governor Pan Gongsheng has described slower loan growth as the new normal for the Chinese economy, a characterization that reflects structural shifts in credit demand from traditional sectors.
The policy choice comes as the US Federal Reserve raised its benchmark rate by 25 basis points the previous week, pushing the federal funds target range to between 3.75 and 4 percent and widening the monetary policy gap between the two largest economies. A BNP Paribas assessment found that China is in the late stage of its rate-cutting cycle, with tight bank net interest margins and a shift from deflation to mild inflation limiting room for additional easing this year. Jacqueline Rong, chief China economist at BNP Paribas, said the base case remains for the central bank to stay on hold through the remainder of 2026, although risks tilt toward a cut if growth falls short of expectations.
Official figures place China’s GDP growth for the first half of 2026 at 4.7 percent year-on-year, a pace that sits comfortably within the government’s full-year target range of 4.5 percent to 5 percent. High-tech manufacturing and equipment sectors have driven much of the industrial expansion, helping offset softer momentum in investment and consumption during the second quarter. The central bank has indicated it will maintain an appropriately accommodative monetary stance while coordinating with proactive fiscal measures to sustain the recovery.
Economists following the announcement expect policymakers to continue using a range of tools rather than relying solely on benchmark rate adjustments. The latest data on new yuan loans, which contracted sharply in July, underscores the challenge of reviving credit demand in the face of property sector weakness and local government financing constraints. Trading Economics analysis places the current one-year LPR at its record low, a level first reached in May 2025.
