China Holds Steady on Lending Rates Amid Trade Tensions

China's benchmark lending rates remained unchanged at the monthly fixing on Thursday, Reuters reports.

This decision, while widely expected, reflects the authorities' cautious approach to monetary stimulus amidst renewed trade tensions with the United States and concerns about currency stability.

The one-year loan prime rate (LPR) remained at 3.10%, while the five-year LPR was unchanged at 3.60%.

In a Reuters poll of 30 market participants conducted this week, all respondents anticipated no changes to either rate.

The decision to hold steady on lending rates comes as China faces a complex economic environment. The yuan has weakened against the dollar since Donald Trump's election victory, and net interest margins at commercial banks are narrowing.

The People's Bank of China said last week that it would adjust its monetary policy at the appropriate time to support the economy. The threat of escalating trade tensions with the United States, due to President Trump's planned tariffs on Chinese imports, are adding to the challenges.

"The authorities will likely guide deposit rates moderately lower and accelerate replenishment of bank capital to alleviate net interest margin pressure at commercial banks," said Wang Qing, chief macro analyst at Golden Credit Rating, to Reuters.

Despite holding rates steady, new yuan loans in January more than quadrupled the December figure, exceeding analysts' forecasts. However, the pace of lending growth compared to the previous year hit a record low, suggesting that credit demand remains sluggish amid economic uncertainties.

"Changes to the pace of interest rate cuts by the Federal Reserve or yuan fluctuations in 2025 will not materially affect the implementation of the central bank's appropriately loose monetary policy," Wang said.