China is widely expected to leave benchmark lending rates steady for a 15th consecutive month in August, a Reuters survey showed, despite recent economic data pointing to renewed weakness across the broader economy. The loan prime rate (LPR), normally charged to banks' most creditworthy clients, is calculated each month after 20 designated commercial banks submit proposed rates to the People's Bank of China (PBOC).
In a Reuters survey of 25 market participants conducted this week, all respondents predicted that at the next review on Thursday, the one-year and five-year LPRs would remain unchanged at 3.00% and 3.50%, respectively.
The strong market expectation of a steady LPR fixing comes despite a string of July data, ranging from industrial output and retail sales to credit lending, showing weak domestic demand in the world's second-largest economy. Analysts said policymakers are more likely to lean on faster fiscal implementation in the near term to support growth than resort to further monetary easing.
Focus should remain on fiscal policies with little sign for an outright LPR cut from the PBOC this month," Citi analysts said in a note. China's leaders pledged at July's Politburo meeting to support the slowing economy by accelerating fiscal spending on already-budgeted infrastructure projects for the remainder of the year, rather than planning major new stimulus measures.
The central bank said last week it would maintain an appropriately loose monetary stance and roll out practical, effective measures as needed, but stopped short of signaling explicit cuts to policy rates or banks' reserve-requirement ratio. Commercial banks' net interest margin (NIM), a key measure of the sector's health, edged up 0.01 percentage point to 1.41% in the second quarter from end-March, marking the first quarterly increase since 2022, although it remained close to a record low.
