China left its benchmark lending rates unchanged in September for the fourth straight month, matching market expectations after the central bank kept a key policy rate steady last week. The one-year loan prime rate (LPR) was held at 3.0 percent on Monday, while the five-year LPR remained unchanged at 3.5 percent. The one-year rate impacts most new and outstanding loans, while the five-year benchmark has a greater impact on mortgages.
The unchanged LPR fixings highlight authorities’ cautious stance on monetary easing, balancing signs of a domestic slowdown against resilient exports, easing Sino-U.S. trade tensions, and a recent stock market rally, even as the Federal Reserve moved toward further policy loosening.
China’s slowdown deepens in August
China’s central bank last cut the key lending rates by 10 basis points in May as part of Beijing’s efforts to shore up its economy. Most recently, it kept its seven-day reverse repo rate—the country’s main policy rate—unchanged last week.
China’s slowdown deepened in August as multiple indicators undershot forecasts. Retail sales grew just 3.4 percent, highlighting persistently weak consumption, while industrial output slowed to 5.2 percent—its softest pace since August last year.
Consumer prices dropped more than expected, with wholesale price deflation persisting for nearly three years, underscoring weak domestic demand. Exports also lost momentum, rising only 4.4 percent, the slowest since February, as earlier frontloading faded and U.S. trade curbs on transshipment pressured sales to third countries.
Meanwhile, U.S. President Donald Trump said he and Chinese President Xi Jinping had made progress on a TikTok deal and would meet in South Korea in six weeks to discuss trade, illicit drugs, and the war in Ukraine. China’s stock market has rallied sharply, with the benchmark Shanghai Composite Index trading near 10-year highs.
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China’s GDP growth to slow to 4.5 percent in 2025
Economists expect Beijing to introduce limited monetary easing later this year to help secure its roughly 5 percent annual growth target. Barclays projects China’s GDP growth to slow to 4.5 percent in 2025, citing a sharper-than-expected downturn despite anticipated policy support.
The bank forecasts the PBOC will lower both the seven-day reverse repo rate and the loan prime rate by 10 basis points in Q4, alongside a 50-basis-point cut to the reserve requirement ratio.
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