The People's Bank of China maintained its key lending rates at historically low levels during the July session, aligning with market expectations. This decision illustrates ongoing economic resilience, although there are lingering concerns about external risks, particularly due to the recent imposition of US tariffs. The one-year loan prime rate (LPR), which serves as the benchmark for most corporate and household loans, was kept at 3.0%. Similarly, the five-year LPR, used to guide mortgage rates, remained at 3.5%.
Recent data indicated that GDP rose by 5.2% in the second quarter, slightly surpassing the anticipated 5.1% but down from the 5.4% growth seen in the two preceding quarters. For the first half of 2025, the economy expanded by 5.3% despite ongoing deflationary pressure, as evidenced by the largest drop in producer prices since July 2023. At the same time, new bank lending surpassed expectations, reaching a three-month high. In May, the central bank responded to the economic challenges posed by US tariffs by reducing borrowing costs by 10 basis points to help buffer the economy.
