BEIJING/SHANGHAI (Reuters) -China is expected to keep benchmark lending rates unchanged for the third straight month in August this week, a Reuters survey showed, despite a string of recent economic data suggesting the economy might lose some momentum.
Rather than resorting to broad-based monetary easing, the central bank may instead place greater emphasis on structural policies aimed at specific sectors to support the economy, market watchers said.
Meanwhile, Beijing’s ongoing “anti-involution” campaign to get rid of industrial overcapacity could also help combat persistent deflationary pressure.
The loan prime rate (LPR), normally charged to banks’ best 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 23 market watchers conducted this week, all respondents expected both the one-year and five-year LPRs to remain steady on Wednesday.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China cut both rates by 10 basis points in May.
“We don’t expect a ‘bazooka-style’ stimulus, while we see targeted demand support in the second half of 2025,” Citi analysts said in a note.
“Structural policies could be a more important venue for the PBOC in the next few months compared with broad-based rate or reserve requirement ratio (RRR) cuts.”
China’s new yuan loans contracted in July for the first time in 20 years as the economy struggled, falling well short of analysts’ forecasts, but improvements in broader credit growth suggest the central bank is in no rush to ease policy.
In the latest quarterly monetary policy implementation report, the central bank said it would implement and refine moderately loose monetary policy.
“We should make good use of structural monetary policy tools to intensify support for scientific and technological innovation, boost consumption, support small and micro enterprises and stabilize foreign trade,” the PBOC said.
(Reporting by Beijing and Shanghai Newsroom; Editing by Sam Holmes)
