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CHINA RATES

China Repo Rates Diverge On Monday

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China's central bank maintained its key loan rate unchanged Friday for the seventh month in a row as it aims to normalize monetary policy with the economy recovering and debt pressures increasing.

The November Loan Prime Rate, the benchmark to set companies' cost of borrowing, remains at 3.85% for the one-year maturity and at 4.65% for the five-year maturity.

The move was expected by policy and market analysts as the PBOC held its Medium-Term Lending Facility rate at 2.95% on Nov.16.

The LPR is linked to the one-year MLF, which is viewed as being closer to market rates. However, the PBOC retains liquidity ample for the inter-bank market and net injected CNY200 billion in MLF this month, the fourth month of net injection in a row.

Policy analysts predict the PBOC is likely to keep its policy rates stable for the rest of the year or even into the first half of next as annual GDP is expected to print at around 2% this year, and may approach 9% in 2021.

So far this year, the PBOC has cut 30 bps off the one-year LPR and 15bps off the five-year. In April, following a 6.8% contraction in Q1 GDP, the PBOC cut the one-year LPR by 20 bps and the five-year LPR by 10 bps, the biggest cuts since the LPR mechanism reform in August.

MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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MNI Sydney Bureau | +61-405-322-399 | lachlan.colquhoun.ext@marketnews.com
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