China holds rates steady despite positive economic data

China’s central bank maintained its wait-and-see approach, keeping benchmark lending rates unchanged at its monthly fixing on Monday, as reported by Reuters. This move aligns with market expectations.

This decision comes after China’s economic growth surpassed expectations in the first quarter, reaching 5.3 per cent year-on-year. This robust performance lessened the urgency for immediate monetary stimulus measures.

However, the PBOC is still facing some headwinds. A weakening yuan, uncertainty surrounding the timing of the first US Federal Reserve rate cut, and shrinking profit margins for Chinese banks are limiting the room for significant policy adjustments.

Market reaction and key rates

As predicted in a Reuters survey, both the one-year and five-year Loan Prime Rates (LPRs) remained unchanged.

The one-year LPR, which influences most loans in China, is currently at 3.45 per cent, while the five-year LPR, impacting mortgage rates, stands at 3.95 per cet.