China Set to Hold Benchmark Lending Rates Steady for 15th Month

China is expected to keep its benchmark lending rates unchanged in August for the 15th consecutive month, despite fresh economic data highlighting persistent weakness in domestic demand.

A Reuters survey of 25 market participants found unanimous expectations that the People’s Bank of China (PBOC) will leave the one-year loan prime rate (LPR) at 3.00% and the five-year LPR at 3.50% at Thursday’s monthly fixing.

China’s loan prime rates, which serve as key benchmarks for corporate and household borrowing, are determined based on rate proposals submitted by 20 designated commercial banks to the PBOC each month.

Expectations for unchanged China interest rates come even as July economic indicators point to slowing momentum. Data covering industrial production, retail sales and credit growth showed continued pressure on domestic demand in the world’s second-largest economy.

Economists believe Beijing is more likely to rely on fiscal stimulus and faster government spending to support economic growth in the near term rather than introduce another round of monetary easing.

Citi analysts said the policy focus is expected to remain on fiscal measures, with few indications that the PBOC will deliver an outright LPR cut this month.

At the July Politburo meeting, Chinese leaders pledged to accelerate fiscal spending on infrastructure projects already included in the government budget. The strategy suggests Beijing is prioritizing the implementation of existing measures instead of launching a major new stimulus package.

The PBOC also said last week that it would maintain an “appropriately loose” monetary policy and introduce practical measures when necessary. However, the central bank did not explicitly signal upcoming cuts to policy interest rates or the reserve requirement ratio for banks.

Meanwhile, Chinese commercial banks received a modest boost as their net interest margin, an important gauge of banking profitability, rose by 0.01 percentage point to 1.41% in the second quarter. It was the first quarterly improvement since 2022, although margins remain near historically low levels.