Trading in leading Asia markets accelerated following the PBoC’s Monday decision to keep the benchmark loan rates unchanged for the 11th consecutive month.
The People’s Bank of China (PBoC) agreed to maintain the loan prime rate, or LPR, without any alterations this April, in what has now been an eleven-month rate stability streak. The one-year LPR was kept at 3.0%, and the five-year LPR remained unchanged at 3.5%.
China’s Loan Prime Rates (LPRs) are benchmark lending rates, serving as a primary reference for local financial institutions when deciding on their own fee structure for corporate loans (based on 1-year LPR) and mortgages (over-5-year rate). LPRs are calculated each month and are based on quotes by 20 Chinese designated banks.
Despite global economic turbulence, China’s regulator had no need to support the national economy with monetary easing in April. The country illustrated solid economic growth in the first quarter of the year. The country’s GDP grew 5% year-on-year to 33.4 trillion yuan (about $4.9T). The inflation rate, though still remaining low, has also shown some movement to the positive range.
Therefore, the benchmark rate announcement was pretty much in line with market expectations. In a Reuters survey of 20 market participants last week, all respondents unanimously predicted no change to China’s lending benchmarks. At the same time, the prolonged rate stability didn’t go unnoticed by the markets.
Japan’s Nikkei 225 rose 0.84%, Hong Kong’s Hang Seng added 0.69%, and South Korea’s KOSPI Composite increased by 1.04%. Meanwhile, in mainland China, the Shanghai Composite advanced by 0.66%, and the Shenzhen Composite gained 0.61%.
The 11-consecutive-months period of unaltered LPRs is even more noteworthy considering that China was one of the countries first and most affected by the U.S. heightened tariff policy. Yet, the prolific production of this Asian country managed to shift trade toward ASEAN markets, EU and Global South to cope with the headwinds and strengthen its economic momentum.
Chinese economy is bolstered by products such as batteries, EVs, solar panels, robotics components, etc. Those have strong global demand and often fewer market analogues, making them shielded from geopolitical tension effects. Today, many of these products are even more needed as countries and households seek ways to diminish their dependence on fossil fuels such as oil and gas, amidst the ongoing U.S./Israeli-Iran war, which sends ripples across energy markets.
