China has kept its benchmark loan prime rates (LPRs) unchanged for the seventh straight month in December, aligning with market expectations. The one-year LPR remains at 3.00%, while the five-year LPR stays at 3.50%. All 25 respondents in a recent Reuters survey anticipated no change to these rates.
The decision signals that Chinese authorities are not rushing to introduce new monetary easing measures, as the economy appears on course to meet the government’s annual growth target.
Analysts point to the central bank’s adoption of “cross-cyclical” policy adjustments, intended to blunt the effects of economic cycles, and the current low profit margins for banks as factors granting policymakers flexibility to delay further stimulus until next year.
During December’s Central Economic Work Conference (CEWC), Chinese policymakers reiterated their intent to maintain a “proactive” fiscal policy in the coming year, aiming to boost consumption and investment in support of high economic growth, which is expected to hover around 5%.
Despite these aims, recent economic data indicated a slowdown in November, with weaker factory output and retail sales, and a notable downturn in household borrowing.
Barclays noted that the CEWC underscored “growth stabilisation and reasonable price increases as the main considerations for monetary policy,” and expects flexible use of policy tools like reserve requirement ratio (RRR) adjustments and interest rate cuts.
The bank continues to see potential for a 10-basis-point cut in policy rates and a 50-basis-point RRR cut, possibly in the first quarter of 2026, to support early government bond issuance.
Meanwhile, Nomura similarly predicts further fiscal expansion to tackle economic headwinds and forecasts a 10bp rate cut and a 50bp RRR cut in the second quarter of 2026.
