China opted not to adjust key lending rates, holding steady for fourth month

China opted not to adjust its key lending rates on Monday, maintaining them for a fourth month running, despite the U.S. Federal Reserve easing policy days earlier.

In its statement, the People’s Bank of China said it maintained the one-year LPR at 3.0% and the five-year LPR at 3.5%. Last Thursday, the PBOC also left its seven-day reverse repo rate unchanged, mirroring the decision to stand pat despite the Fed’s 25-basis-point cut.

The central bank last lowered its key lending rates in May, cutting them by 10 basis points as part of Beijing’s push to support economic growth.

China’s economy slowed in August

Monday’s decision was broadly anticipated, as Chinese authorities have warned about major stimulus measures following a rebound in equities, despite data showing the economy remains under strain.

According to August data, key metrics underperformed expectations. Retail sales growth cooled to 3.4%, and industrial output slowed to 5.2%, its weakest reading since last August. The country also posted a larger-than-expected decline in consumer prices, with producer prices deflated for nearly three years.

Nonetheless, the country posted 4.4% export growth in August. However, it was the slowest growth rate since February, as early shipment gains tapered off and U.S. actions against transshipment dampened flows to other markets. 

Per Barclays economists, the overall economic momentum weakened noticeably in Q3, dragged down by a steeper real estate slump, fading fiscal stimulus, and tighter controls on industrial overcapacity. They even noted that nearly every housing indicator plummeted in August. As a result, analysts broadly expect Beijing to opt for modest monetary stimulus before year-end to help the economy meet its 5% growth goal.

Hong Hao, managing partner and CIO at Lotus Asset Management, also commented, “Beijing’s focus has shifted from risk management to growth stimulation, moving from tolerating deflation to reflating the economy.” 

He added that China had reached a point where it needed to halt inefficient, debt-driven asset accumulation and start cutting back on unproductive investments. He also asserted that he expects more policy stimulus in the months ahead.

So far, Barclays has lowered its forecast for China’s real GDP growth to 4.5% in 2025, citing a deeper-than-anticipated slowdown. The bank still expects Beijing to provide additional support, projecting that the PBOC will cut the seven-day reverse repo rate and loan prime rate by 10 basis points each in the fourth quarter, and reduce the reserve requirement ratio by 50 basis points.

Trump says they’ve made progress in talks with Xi on TikTok

Meanwhile, the U.S. president recently announced that talks with Chinese President Xi Jinping had advanced on TikTok and that the two leaders would meet in South Korea in about six weeks to discuss trade, drug concerns, and the Ukraine conflict.

Reportedly, U.S. lawmakers met Premier Li Qiang at the Great Hall of the People on Sunday, hoping the talks would serve as a first step toward improving ties between Washington and Beijing. 

On Saturday, the White House had said that a tentative agreement would place TikTok’s algorithm under the control of U.S. companies and seat six Americans on a seven-member board supervising its U.S. arm.

Speaking to reporters, Trump also said a group of “great American patriots” was preparing to acquire TikTok. Once scheduled for a January ban, the app has been allowed to keep operating under several presidential orders while negotiations with ByteDance over its U.S. operations proceed.

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