China does not change lending standards as expected According to Reuters

© Reuters. FILE PHOTO: People wearing face masks walk past the headquarters of China’s central bank People’s Bank of China (PBOC), April 4, 2020. REUTERS / Tingshu Wang / File Photo / File Photo

SHANGHAI (Reuters) – China left its benchmark lending rate unchanged at its monthly set on Tuesday, in line with expectations, as authorities appeared to halt monetary easing immediately after the recent rapid decline of the renminbi.

The one-year loan prime rate (LPR) was kept at 3.65%, while the 5-year LPR was unchanged at 4.30%.

In a Reuters poll conducted this week, 21 out of 28 respondents, or 75% of total participants, predicted no change to either ratio.

The stable LPR fix comes after the People’s Bank of China (PBOC) last week left its medium-term policy rate unchanged, while draining liquidity from the banking system.

Policymakers are cautiously striking a balance between supporting a slowing economy and not creating new economic risks, analysts say.

Beijing’s expansionary policy divergence with most other major economies, which have been aggressively raising interest rates to contain inflation, have weighed on the currency and limited the possibility of further easing. currency.

China cut key interest rates in August, as Beijing stepped up efforts to revive an economy hit by an asset crisis and a resurgence in COVID-19 cases.

But the rate cut has accelerated the yuan’s decline. It has lost about 4% against the dollar since mid-August, breaching the psychologically important 7 per dollar mark and injecting capital outflow risks.

The LPR, which banks typically charge their best customers, is set up by 18 designated commercial banks, who submit suggested rates to the PBOC on a monthly basis.

Most new loans and outstanding loans in China are based on the one-year LPR, while the five-year interest rate affects the valuation of mortgages.

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