China’s Loan Prime Rate Remains Unchanged for 15th Consecutive Month in July Despite Reserve Ratio Cut

The benchmark rate for the Chinese banking sector has held steady for the 15th consecutive month in the month of July. 

The LPR’s is­sued by Chi­na’s Na­tional In­ter­bank Fund­ing Cen­ter (全国银行间同业拆借中心) on 20 July were 3.85% for the one year LPR and 4.65% for the five year LPR – the same as the readings for the preceding month. 

Chi­na’s LPR’s have re­mained at the same level since April 2020, when the one year LPR fell by 20 ba­sis points com­pared to the March read­ing of 4.05%, and the five year LPR fell by 10 ba­sis points from 4.75%. 

The latest LPR arrives just after the Chinese central bank reduced the reserve ratio by 0.5 percentage points, which is expected to cut annual costs for banks by 13 billion yuan, and was expected to drive a small decline in the LPR.

“It is likely that the reason that the LPR for July remained unchanged is that the average adjustments of the 18 quoting banks was smaller than the minimum adjustment calculation increment, which is 5 basis points,” said Wang Qing (王青), chief macro-analyst with Golden Credit Rating.

The LPR in China is the lend­ing rate pro­vided by com­mer­cial banks to their high­est qual­ity cus­tomers, and serves as the bench­mark for rates pro­vided for other loans.

The Na­tional In­ter­bank Fund­ing Cen­ter serves as the des­ig­nated pub­lisher of the LPR, and re­leases the fig­ures at 9:30 am on the 20th of each month, af­ter first col­lect­ing quotes from the group of re­port­ing banks and cal­cu­lat­ing the av­er­age of these quotes fol­low­ing ex­clu­sion of the low­est and high­est quotes.

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