Lãi suất cho vay cơ bản của Trung Quốc duy trì ổn định tháng 6/2024

The People's Bank of China maintains the benchmark lending rate to cope with slow growth and weak consumer confidence.

The 1-year and 5-year Loan Prime Rates (LPR) remain at 3.0% and 3.5%, primarily determining consumer and mortgage loan interest rates in China.

MAIN CONTENT

  • The People's Bank of China maintains the 1-year LPR at 3.0% and the 5-year LPR at 3.5%.

  • GDP growth in the second quarter reached 5.2%, lower than in the first quarter but exceeding the forecast of 5.1%.

  • Risks of weakened demand in the second half of 2025, potential for new stimulus policies before the end of the year.

Why does the People's Bank of China maintain the benchmark lending rate?

HSBC economist Frederic Neumann assesses that the current growth still exceeds the target, so there is no need to cut interest rates yet. Interest rates are already low, and monetary measures may be less effective than fiscal solutions.

The 1-year Loan Prime Rate (LPR) remains at 3.0% and the 5-year at 3.5%, playing a decisive role for many personal and business loans. The LPR is surveyed from various commercial banks sending proposals to the People's Bank of China to serve as a basis for interest rate adjustments.

The policy of maintaining the interest rate 'helps preserve the 'policy space' for further moves if the impact of U.S. tariffs on Chinese exports becomes more severe,' according to Frederic Neumann, HSBC, July 2025.

Frederic Neumann, HSBC economist, July 2025

How is China's economic growth in the second quarter of 2025?

Gross Domestic Product (GDP) in the second quarter recorded a growth of 5.2% year-on-year, lower than the 5.4% in the first quarter but still exceeding economists' forecast of 5.1%. Despite signs of slowing down, this result shows that the economy maintains stable growth amid many challenges.

Retail sales in June only increased by 4.8% compared to the same month in May, slowing from 6.4% in May and lower than the expected 5.4%. This situation reflects declining consumer confidence and pressure on the domestic economy.

What risks could affect economic growth in the second half of 2025?

Nomura's analysis team warns that the economy may face a 'demand peak' and significantly weaken in the second half of 2025 due to stagnant exports and the impact of U.S. tariffs. GDP is projected to slow to around 4.0% year-on-year, down from 5.1% in the first half of the year.

This puts pressure on the budgets of localities and may prompt Beijing to quickly implement additional economic support policies before the end of the year.

"Demand will sharply decline as exports are affected by tariffs, and the asset market will face greater pressure in the last months of the year," according to Nomura experts, July 2025.

Nomura Global Markets, economic report, July 2025

What are the differences between the 1-year and 5-year LPR?

The 1-year LPR mainly affects personal and short-term business loans, ensuring interest rate flexibility based on the market. Meanwhile, the 5-year LPR is predominantly used as a benchmark for long-term real estate mortgage contracts.

The stability of the two interest rates reflects a cautious monetary policy aimed at balancing growth support and macro risk control.

How does monetary policy affect the money market and the exchange rate of the renminbi?

The decision to maintain the interest rate helps stabilize the renminbi, reflected in the trading rate of about 7.179 renminbi per 1 USD in the international market. A stable monetary policy also helps reduce volatility in domestic credit and financial channels.

What economic support mechanisms could be implemented in the second half of 2025?

Some analysts believe that fiscal stimulus measures such as increasing public investment, cutting taxes, or supporting businesses will be intensified to offset the weakening in exports and consumption. The goal is to avoid falling into a negative economic recession as external and domestic pressures increase.

Frequently Asked Questions

1. What is the LPR and why is it important?

The LPR is the benchmark lending rate set by the People's Bank of China based on market surveys, affecting housing loans, businesses, and domestic consumption.

2. Why is China not lowering interest rates despite slowing growth?

HSBC experts emphasize that growth still exceeds the target and the current low interest rates mean that more effective fiscal measures may take precedence over further interest rate cuts.

3. What are the main economic risks for China in the second half of 2025?

Risks include declining demand, export pressures due to U.S. tariffs, and declining asset markets, which could cool GDP down to 4.0%.

4. What economic support policies are forecasted to be implemented?

Beijing may boost public investment, loosen fiscal policies, and support businesses to stimulate growth before the end of 2025.

5. In which sectors is the 5-year LPR primarily used?

This interest rate mainly serves as a benchmark for long-term real estate mortgage contracts in China.

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