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21 October 2019
ECONOMY

Chinese banks unexpectedly keep loan prime rate steady in October 2019

The Chinese economy has been under pressure amid a prolonged trade dispute with the US, prompting the central bank to ease monetary policy by lowering corporate borrowing costs and cutting banks’ reserve ratios this year.

BLOOMBERG/PAUL YEUNG


China’s base rate for new corporate loans stayed unchanged in October 2019, defying expectations of a reduction as the economy sees its slowest pace of growth since the early 1990s, reported Bloomberg.

According to the central bank, the one-year loan prime rate (LPR) was kept at 4.2 per cent and the five-year tenor was also kept unchanged at 4.9 per cent.

The LPR is a revamped market indicator of the price that lenders charge clients for new loans and is linked to the rate at which the central bank will lend financial institutions cash for a year. It’s made up of submissions from a panel of 18 banks, though Beijing has a role in setting the level.

A static one-year rate shows China “may be trying to balance the shrinking margins of banks with support to the real economy,” said Zhou Hao, a Senior Emerging-Markets Economist at Commerzbank.

October’s rate comes as China continues to offer credit support to the economy, including a surprising $28 billion injection of one-year cash into the financial system last week. Gross domestic product rose six per cent in the July-September 2019 period from a year ago as investment slowed, missing a consensus forecast of 6.1 per cent.

Still, the People's Bank of China has not embarked on an aggressive stimulus programme as some market watchers had hoped.


RELATED STORIES: US-CHINA TRADE WAR PEOPLE\'S BANK OF CHINA LOAN PRIME RATE


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