China on Alert at 'Daesuman-gwan' Border, Keeps LPR as Benchmark Interest Rate Unchanged

[Asia Economy Beijing=Special Correspondent Park Sun-mi] China is adjusting the pace of monetary policy easing by freezing the LPR (Loan Prime Rate), which serves as the benchmark interest rate.

On the 22nd, the People's Bank of China announced the 1-year LPR at 3.85% and the 5-year LPR, which affects mortgage loan rates, at 4.65%. After lowering the 1-year and 5-year rates by 0.20 percentage points and 0.10 percentage points respectively in April, the rates have been frozen for two consecutive months.

Chinese authorities have been supplying liquidity by lowering the reserve requirement ratio and LPR as the economy contracted due to the COVID-19 pandemic this year. However, they maintain their stance against large-scale liquidity injections akin to {$_dasu-mang-gwan_} (大水漫灌, an irrigation method that floods farmland) due to concerns about side effects such as increased debt caused by sudden massive monetary easing. The focus of economic stimulus measures is more on fiscal policies, such as expanding infrastructure investment, rather than monetary policy.

Yi Gang, Governor of the People's Bank of China, recently warned in a keynote speech at a financial forum to be cautious of the aftereffects that economic stimulus measures following the COVID-19 pandemic might cause, stating "It is important to maintain a balance between stimulus and control." Governor Yi emphasized the need for prudence in monetary easing, saying, "We should pay attention to policy aftereffects and maintain the total liquidity at an appropriate level while considering in advance the right time to withdraw related policy tools."

This content was produced with the assistance of AI translation services.