China set to keep lending standards unchanged

SHANGHAI, Feb 17 (Reuters) – Most observers expect China to keep benchmark lending rates unchanged at Monday’s monthly fix, a Reuters poll showed, as investors believe the world’s second-largest economy world is on the way to recovering from the decline. of COVID-19.

Some early signs of recovery seen in a string of better-than-expected economic data since Beijing’s abrupt exit from its strict zero-COVID strategy in December have undermined the urgency for an imminent easing of monetary policy.

The Lending Prime Rate (LPR), which banks typically charge their best customers, is calculated monthly after 18 designated commercial banks submit rate proposals to the People’s Bank of China (PBOC). .

In a survey of 27 market watchers, 21, or 78% of all participants, predicted no change in the one-year or five-year LPR.

The other six respondents, however, expected a marginal reduction in the five-year interest rate, whereas they believed that the one-year term would remain stable.

The strong consensus for a stable one-year interest rate came as new bank lending in China rose more than expected to a record 4.9 trillion yuan ($713 billion) in January. , at a time when the central bank is trying to fuel the recovery. .

On the other hand, China’s central bank increased medium-term liquidity injections by renewing expiring credit facilities this week, while keeping interest rates unchanged.

The Medium Term Lending Facility (MLF) rate now serves as a guide for the LPR.

“Given that the economy is recovering and the People’s Bank of China has kept the one-year MLF interest rate unchanged, we expect the chances of a change in the LPR to be slim,” the analysts said. ING economists in a note.

“Additionally, the government told banks to offer lower interest rates on mortgages to support the economy. This would mean that banks would not have enough leeway to reduce margins. of interest.”

China’s new home prices rose in January for the first time in a year, after Beijing gradually increased support for the property sector, which accounts for a quarter of the national economy, since late last year. stimulated demand.

($1 = 6.8764 Chinese Yuan)

(Reporting by Li Hongwei and Brenda Goh; Writing by Winni Zhou; Editing by Kenneth Maxwell, Editing in Spanish by José Muñoz of Gdansk Newsroom)