China left its benchmark lending rate unchanged.

SHANGHAI (Reuters) – China’s lending rate remained unchanged for a third straight month, as expected, as a weakened yuan curbed Beijing’s efforts to ease monetary policy.

In Monday’s monthly decision, the one-year loan principal rate (LPR) stood at 3.1%, while the five-year LPR was unchanged at 3.6%.

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

In October 2024, China’s lenders cut lending rates more than expected to stimulate economic activity.

Why is it important?

China’s economy beat the government’s target of 5% growth last year, with the yuan facing fresh devaluation pressures as it quickly scaled back monetary stimulus.

Banks’ interest rate margins also limit the scope for monetary easing.

In number

The one-year loan prime rate (LPR) remained unchanged at 3.1%, while the five-year LPR was unchanged at 3.6%.

CONTEXT

China has stepped up measures to put a floor under the yuan, from verbal warnings, adjustments to capital outflows and offshore yuan bills.

Investors are hedging bets on an imminent rate cut in China, the primary market showed, amid growing expectations that authorities will refrain from easing policy as the yuan weakens.

The Politburo said earlier last month that China would adopt an “appropriately loose” monetary policy by 2025, easing its stance for the first time in 14 years, alongside a more proactive fiscal policy to spur economic growth.

(Reporting by Shanghai Newsroom; Editing by Jacqueline Wong and Sri Navaratnam)