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Financial News: China Keeps Benchmark Lending Rates Unchanged

China Keeps Benchmark Lending Rates Unchanged

12/21/2020 - 00:37:00 (RTTNews)

(RTTNews) - China's benchmark lending rates were left unchanged as the economy continued to recover strongly from the coronavirus driven downturn.

The one-year loan prime rate was retained at 3.85 percent and the five-year loan prime rate was maintained at 4.65 percent.

The one-year and five-year loan prime rates were last reduced in April. The one-year loan prime rate was lowered by 20 basis points and five-year rate by 10 basis points in April.

As the PBoC had not adjusted the rate on its medium-term lending facility early this month, commercial banks were widely expected to retain the LPR today.

The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This new lending rate replaced the central bank's traditional benchmark lending rate in August 2019.

With the economy now back on track, the PBoC is shifting its focus away from supporting growth back towards reining in financial risks, Julian Evans-Pritchard and Sheana Yue, economists at Capital Economics, said.

With China's leadership eyeing a gradual withdrawal of policy support, the PBoC is likely to start to hike its policy rates next year, the economists added. The bank is expected to hike its policy rates by 30 basis points in 2021.

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