China is widely anticipated to leave its benchmark lending rates unchanged for a 15th consecutive month in August, despite signs of renewed economic weakness across key sectors.
A Reuters survey of 25 market participants, conducted the week prior to the People’s Bank of China’s (PBOC) scheduled rate review on August 15, found unanimous consensus that the one-year and five-year loan prime rates (LPRs) would remain at 3.00% and 3.50%, respectively. The LPRs, which serve as reference rates for banks’ most creditworthy corporate borrowers, are set monthly based on submissions from 20 designated commercial banks.
The decision follows July data indicating persistent softness in domestic demand, with industrial output, retail sales, and credit lending all underperforming expectations. Analysts suggest policymakers are prioritizing faster fiscal implementation over monetary easing to bolster growth. Citi noted in a client briefing that the focus should remain on fiscal policies, adding that there was little indication of an outright LPR cut by the PBOC this month.
China’s leadership, in a July Politburo meeting, pledged to support the slowing economy by accelerating spending on pre-budgeted infrastructure projects through year-end rather than introducing major new stimulus measures. The central bank reiterated its stance the prior week, stating it would maintain an appropriately loose monetary policy and deploy targeted measures as needed, without signaling explicit cuts to policy rates or reserve-requirement ratios.
Commercial banks’ net interest margins (NIMs) edged up by 0.01 percentage point to 1.41% in the second quarter, marking the first quarterly increase since 2022. Despite the uptick, margins remain near record lows, reflecting ongoing pressure on profitability amid a prolonged period of monetary accommodation.
