[Breaking] China Holds 'De Facto Benchmark Rate' LPR Steady for 19 Months

[Image source=Yonhap News]

[Asia Economy Reporter Kim Suhwan] China has effectively kept its Loan Prime Rate (LPR), which serves as the benchmark interest rate, unchanged for 19 consecutive months.

On the 22nd, the People's Bank of China, the country's central bank, announced the 1-year and 5-year LPR at 3.85% and 4.65%, respectively, the same as the previous month. The LPR has remained at this level for 19 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, which all financial institutions in China use as a benchmark for corporate and household loans, functions as a de facto benchmark interest rate. The LPR is calculated as the average of the best loan rates reported by 18 commercial banks in China, adding bank funding costs, risk premiums, and other factors to the 1-year Medium-term Lending Facility (MLF) rate.

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