On Friday, China maintained its main benchmark lending rates unchanged at the monthly fixing amidst the Federal Reserve’s interest rates cut.
Reuters market watchers’ poll predicted some shaving after the Federal Reserve’s 50 basis point rate cut allowed China to lower its domestic borrowing costs without triggering a significant depreciation in yuan.
The People’s Bank of China (PBOC) announced its decision to keep the one-year loan prime rate (LPR), affecting corporate and most household loans, at 3.35%, and the five-year LPR, a benchmark for mortgage rates, at 3.85%.
The interest rate reduction in the US has provided China with increased monetary flexibility to concentrate on alleviating the debt pressure on both consumers and businesses. This strategy aims to stimulate investment and consumption within the country.
China already surprised the markets in July by trimming major short- and long-term lending rates to bolster economic growth, which was facing a persistent property crisis and weakening consumer and business sentiment.
China’s retail sales, industrial production, and urban investment in August exhibited slower growth than economists’ expectations, with the urban unemployment rate climbing to a six-month high, while housing prices, on a yearly basis, falling at the fastest rate in nine years.
The discouraging economic data emphasized a weak momentum in the economy and prompted renewed appeals to the government to roll out more fiscal and monetary stimulus efforts.
Several major banks have revised their predictions for China’s full-year GDP growth to below the government’s official goal of 5%, with Bank of America downgrading the figure to 4.8%, and Citigroup altered their assessment to 4.7%.
