When the Fed announced interest rate cuts on Wednesday, competing economies across the globe followed suit, barring China. On Friday, China declared that it will keep its benchmark lending rates unchanged at the monthly fixing.
The People’s Bank of China (PBOC) informed it would keep the one-year loan prime rate (LPR) at 3.35% and the five-year LPR at 3.85%. The one-year LPR impacts corporate and most household loans in China, while the five-year LPR acts as a benchmark for mortgage rates. China trimmed short- and long-term lending rates back in July to resuscitate business activity and consumer spending in the country. August presented a similar status quo, with slower-than-expected retail sales, industrial production, and urban investment in China. These underwhelming figures were supplemented with record-high unemployment rates and plunging year-on-year real estate prices.
Dampened economic indicators served as an immediate call to action for Chinese policymakers. Experts revealed to CNBC that China does not intend to relax monetary policies and lower rates. Brendan Ahern, chief investment officer at KraneShares, informed CNBC that “China’s issue is not a supply problem; it’s a demand problem,” shedding light on the urgent need for fiscal support to revive consumer confidence and increase real estate prices.
