China keeps benchmark lending rates unchanged for 13th month in June
The steady loan prime rates signal authorities are in no rush to ease policy
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[SHANGHAI] China left benchmark lending rates unchanged for the 13th consecutive month in June on Monday (Jun 22), in line with market expectations.
The steady loan prime rates signal authorities are in no rush to ease policy, even as broader economic divergence persists and policymakers show little concern about slowing credit growth.
The one-year loan prime rate (LPR) was kept at 3 per cent, while the five-year LPR was unchanged at 3.5 per cent.
In a Reuters survey of 30 market participants conducted last week, all participants predicted no change to either of the two rates.
Recent economic data showed that a two-speed growth pattern in the world’s second-largest economy, with factories buoyed by surprisingly resilient exports but domestic demand worsening amid a years-long property downturn.
Pan Gongsheng, governor of the People’s Bank of China (PBOC), told the annual Lujiazui Forum last week that loan growth has slowed in recent years, even as bond and equity financing has steadily gained traction, describing the shift as evidence of “profound economic restructuring” and new growth engines.
China’s new bank lending rose less than expected in May after contracting the previous month, as a prolonged property downturn continued to weigh on household borrowing.
“We do not expect outright policy-rate cuts in the second half... The persistent issue facing the aggregate economy is not a shortage of liquidity supply, but a lack of credit demand,” Jing Sima, chief strategist at BCA Research, said. “Our base case is that fiscal policy becomes more supportive in the second half of the year, while the PBOC remains broadly accommodative but refrains from outright rate cuts.”
UOB economist Ho Woei Chen said: “Unless further evidence suggests that growth could slow below the official target of 4.5 to 5 per cent, we think policy responses will be incremental.” REUTERS
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