China maintained its benchmark lending rates on Thursday, signaling a cautious approach to monetary stimulus as authorities focus on financial and currency stability amid renewed trade tensions with the Trump administration.
- One-year loan prime rate (LPR): 3.10% (unchanged)
- Five-year LPR: 3.60% (unchanged)
A weakening yuan and narrowing net interest margins at banks have limited China’s ability to ease monetary policy despite ongoing economic uncertainties.
Monetary Policy and Trade Tensions
China’s central bank has signaled it will adjust policy as needed to support the economy, particularly as trade tensions escalate with the U.S. under Donald Trump.
- Trump has imposed a 10% tariff on Chinese imports, prompting retaliatory measures from Beijing.
- During his first term, similar trade disputes drove the yuan down over 12% against the dollar (2018-2020).
- Since Trump’s recent election win, the yuan has declined 2.4% against the dollar.
Bank Lending and Economic Outlook
- New yuan loans in January: 5.13 trillion yuan ($704.35 billion)—more than four times December’s figure but slower than last year, reflecting weak credit demand.
- Policymakers are expected to lower deposit rates moderately and boost bank capital to ease financial strain.
Analyst Wang Qing noted that U.S. Federal Reserve rate changes or yuan fluctuations in 2025 are unlikely to significantly impact China’s “appropriately loose” monetary policy.
