The People’s Bank of China (PBOC) kept its key lending rates unchanged on Monday, marking the fourth consecutive month of no adjustments, even after the U.S. Federal Reserve lowered interest rates by 25 basis points last week.
According to the central bank’s announcement, the one-year loan prime rate (LPR) remained at 3.0%, while the five-year LPR — which directly influences mortgage costs — stayed at 3.5%. The last rate cut was in May, when Beijing reduced both benchmarks by 10 basis points in an effort to support growth.
The decision was widely expected by economists, as Chinese policymakers aim to avoid aggressive stimulus while domestic stock markets show signs of recovery. The CSI 300 index opened higher Monday but later slipped 0.24%. Meanwhile, the offshore yuan strengthened slightly to 7.1161 per U.S. dollar.
Recent economic data highlight China’s continued slowdown in August:
Retail sales grew just 3.4%, missing forecasts.
Industrial output expanded 5.2%, its weakest pace since August 2023.
Consumer prices (CPI) fell more than expected, while wholesale prices remained stuck in deflation for nearly three years.
Exports rose only 4.4%, the slowest since February, pressured by weaker global demand and U.S. trade restrictions.
The broader outlook worsened in the third quarter as the real estate slump deepened, fiscal stimulus waned, and efforts to curb industrial overcapacity further slowed output.
Barclays economists noted: “Almost all housing indicators deteriorated further in August. We expect marginal monetary easing later this year to help China achieve its 5% growth target.”
The bank forecasts China’s real GDP growth will slow to 4.5% in 2025, citing a sharper-than-expected deceleration. Still, incremental policy support is likely in the coming months. Barclays expects the PBOC to cut the one-year LPR and seven-day reverse repo rate by 10 basis points in Q4, alongside a 50-basis-point reduction in the reserve requirement ratio (RRR).
Hong Hao, Managing Partner and CIO at Lotus Asset Management, added: “Beijing’s focus has shifted from risk management to growth stimulation, moving from tolerating deflation to reflating the economy. China must now curb inefficient, debt-driven investments and channel resources into more productive areas.”
.png){kind=logo}
Tiếng Việt
English
