China Holds De Facto Benchmark LPR Steady for Sixth Month: "Urgency Eases" (Comprehensive)

One-Year LPR Held at 3.0%
Five-Year LPR Maintained at 3.5%

Xi Jinping, President of China. Photo by Yonhap News

China maintained its Loan Prime Rate (LPR), which effectively serves as the benchmark interest rate, at the current level in November, marking the sixth consecutive month of holding rates steady. In the market, observers noted that the Chinese government now has less incentive to rush into a rate cut.

According to Reuters on the 20th, the one-year LPR remained at 3.0%, and the five-year LPR at 3.5%. This outcome was in line with market expectations, as all 23 market participants surveyed by Reuters predicted that both rates would remain unchanged.

In China, most new and existing loans are linked to the one-year LPR, while the five-year LPR serves as the basis for setting mortgage rates.

Market consensus has emerged that the pressure for the Chinese government to lower rates has weakened. In particular, analysts highlighted that the central bank mentioned 'cross-cyclical' policy adjustments for the first time since the first quarter of last year in its third-quarter monetary policy report, according to Reuters.

Tommy Xie, Head of Greater China Research at OCBC Bank, commented, "This terminology indicates that the urgency for broad-based rate cuts has diminished," and analyzed, "The policy focus may shift from broad-based rate reductions to targeted credit support."

China's cross-cyclical policy approach means adopting a long-term view of the economic cycle and aiming to reduce volatility. When the economy is strong, the policy seeks to prevent overheating, and when the economy is weak, it avoids excessive stimulus, instead pursuing medium- to long-term stability.

There also appears to be a general consensus that the overall interest rate level is not high. According to state-run Xinhua News Agency, the weighted average interest rate on new corporate loans in October was 3.1%, about 40 basis points (1bp = 0.01 percentage points) lower than a year earlier.

Xinhua News Agency reported, "This year, the cost of social financing in China has continued to decline, and lending rates have remained at low levels."