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China Likely to Keep Benchmark Rates Steady, Survey Finds

A China central bank survey reveals household employment confidence hit its lowest level since 2008.
People walk along Nanjing Pedestrian Road, a main shopping area. Photo: Reuters.


China is likely to keep benchmark lending rates unchanged at its monthly fixing on Monday, a Reuters survey found, after the central bank surprised investors by forgoing a cut to medium-term lending rates this week.

The poll nevertheless found expectations for cuts growing after Liu He, China’s vice-premier, on Wednesday said Beijing would roll out more support measures for the Chinese economy.

Among 36 financial institutions surveyed in a snap Reuters poll, just over half said they expected China’s one-year loan prime rate (LPR) and the five-year rate to remain unchanged at the March fixing.

Five respondents said they anticipated a 5 basis point reduction in the five-year rate and no change in the one-year rate.

“I think they’ll cut the five-year, since the one-year follows the MLF,” said a trader at a Chinese bank. “They want to stabilise the property market so it’s more important to cut the five-year.”

The central bank surprised markets on Tuesday by not cutting its one-year medium-term lending facility (MLF) rate, despite growing risks to the economic outlook from coronavirus, the Ukraine war and a weak property market.

Reflecting market uncertainty, other respondents predicted a wide range of different cuts.

Four respondents expected a 5 basis point cut in the one-year rate, but no change in the five-year, and six respondents said they expected at least one of the rates to be cut by 10 basis points.

Regardless of whether Monday’s fixing brings a cut, investors see Liu’s comments as having boosted the likelihood of other easing measures, particularly as China struggles with a worsening Covid-19 outbreak.

“Given strict social distancing measures, it is likely that more cities could find themselves being put under ‘semi-lockdown’,” analysts at ING said in a note.

The one-year LPR is 3.7% following cuts of 5 and 10 basis points in December and January, respectively, while the five-year LPR is 4.6% after a 5-basis-point cut in January.


  • Reuters, with additional editing by George Russell



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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.


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