[Breaking] China Effectively Holds Benchmark LPR Steady for 15 Consecutive Months

[Asia Economy Reporter Kim Suhwan] China has effectively kept its Loan Prime Rate (LPR), which serves as the benchmark interest rate, unchanged for 15 consecutive months.

On the 20th, the People's Bank of China announced that the 1-year and 5-year LPRs were maintained at 3.85% and 4.65%, respectively, the same as the previous month. The LPR has remained at this level for 15 months since it was cut by 0.20 percentage points (for the 1-year term) in April last year, when COVID-19 was at its peak.

The LPR, announced by the People's Bank of China and used by all financial institutions in China as the benchmark for corporate and household loans, functions as a de facto benchmark interest rate. The LPR is the average of the best loan rates reported by 18 commercial banks in China and is calculated by adding banks' funding costs and risk premiums to the 1-year Medium-term Lending Facility (MLF) rate.

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