Chinese banks kept their benchmark lending rates steady on Monday, with the one-year loan prime rate (LPR) at 3.45 per cent and the five-year rate for mortgages at 3.95 per cent, Bloomberg reported. China's economic recovery is uneven, with a strong industrial sector but sluggish domestic demand due to a property market slump. Credit growth declined in April, reflecting weakened business and consumer confidence. The People's Bank of China (PBC) signalled its cautious approach last week by holding its policy loan rate steady. While prioritising economic recovery, the central bank aims to avoid putting pressure on the yuan's exchange rate. In the future, economists anticipate that the PBC may lower interest rates or increase liquidity in the financial system. This could include reducing the reserve requirement ratio for banks, enabling them to lend more easily and support government bond purchases as part of Beijing's fiscal stimulus efforts. Looking ahead, economists predict that the PBOC may resort to rate cuts or increase liquidity in the financial system. This could involve lowering the reserve requirement ratio for banks, allowing them to lend more freely. This would also facilitate purchases of government bonds as Beijing ramps up fiscal stimulus. China's efforts to revitalise its economy include a 1 trillion-yuan ($139 billion) issuance of special sovereign bonds to sustain infrastructure spending. Additionally, provincial governments are accelerating local bond issuance. Policymakers are actively pursuing measures to address the imbalances within the economy. A key focus is stimulating domestic demand, with recent initiatives targeting the ailing property sector. These include a nationwide programme channelling 300 billion yuan in cheap funds to state-owned enterprises for buying unsold apartments. Additionally, authorities have removed the minimum floor on mortgage rates and lowered down payment requirements for homebuyers.
