The People's Bank of China issued a decision this morning, Monday, regarding the primary interest rate for one-year and five-year loans (LPR), which aligned with market expectations.
In this regard, the People's Bank of China decided to maintain the primary lending rate at 3.10% for one-year loans. The central bank of China also kept the primary lending rate for five-year loans at 3.60%, as expected.
It is worth noting that the primary lending rate (LPR) set by the People's Bank of China is the benchmark interest rate used in China, which is determined by the Bank every month, usually on the 20th day, unless there is a holiday. The new LPR takes effect from the first day of the following month.
The primary lending rate serves as a reference rate for banks when setting interest rates for loans offered to their clients. It is calculated based on the rates provided daily by a committee composed of 18 selected commercial banks in China to the People's Bank of China. The committee consists of local and foreign banks, with different weights assigned to each bank’s contributions based on its size and significance in the Chinese financial system.
The LPR is based on the average rates submitted by these banks, excluding the highest and lowest rates to reduce fluctuations and manipulation, and then the remaining rates are arranged. The average rate becomes the LPR.
