The People’s Bank of China (PBoC) has established a committee focused on fintech.
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On Thursday, China decided to keep its main lending rates stable, emphasizing financial stability over the need to reduce interest rates to stimulate economic growth.
The People’s Bank of China maintained the 1-year loan prime rate at 3.1% and the 5-year LPR at 3.6%.
These benchmark lending rates, typically applied to banks’ most reliable clients, are recalibrated monthly based on the rates proposed by designated commercial banks to the PBOC. The one-year LPR significantly impacts both corporate loans and the majority of household loans in China, while the five-year LPR acts as a key reference for mortgage rates.
This decision aligns with the predictions made in a Reuters poll.
During a conference in Saudi Arabia on Sunday, PBOC Governor Pan Gongsheng underscored that a stable yuan is vital for maintaining global financial and economic stability. He noted that while many currencies have weakened against a strengthening U.S. dollar, the yuan has largely remained stable.
Since Donald Trump’s election victory in November, the Chinese yuan has declined by 2.5% against the dollar.
Pan also indicated that China is increasingly focusing on boosting consumption, while reaffirming Beijing’s dedication to implementing a proactive fiscal policy alongside an accommodative monetary policy for the year.
Recently, the PBOC has been making efforts to support the yuan in light of downward pressure, driven by the threat of higher tariffs, which complicates their efforts to stimulate a struggling economy.
However, the approach of bolstering the yuan carries economic risks, as a depreciated yuan could help maintain the competitiveness of Chinese exports, whereas a stronger yuan makes imports more costly, particularly when consumer demand appears weak.
Since taking office last month, President Donald Trump has levied a 10% tariff on all imports from China, in addition to pre-existing tariffs of up to 25%.
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