China kept its key lending rates steady at 3.0% for one-year and 3.5% for five-year loans

On Monday, China’s benchmark lending rates remained unchanged as it faces softening growth and weak consumer confidence.

The People’s Bank of China left the one‑year LPR at 3.0 percent and the five‑year loan prime rate at 3.5 percent.

Loan prime rates, set by a survey conducted by a number of commercial banks that send rate proposals to the nation’s central bank, guide the best rates offered to top clients.

The one‑year LPR plays a key role in shaping most household and corporate loans across China. The five‑year rate is widely used as the reference for new mortgage contracts.

This decision followed the release of second‑quarter GDP figures showing 5.2 percent growth year‑on‑year, lower than 5.4 percent in Q1 but slightly above the 5.1 percent forecast.

Retail sales in June lost momentum, rising 4.8 percent in comparison with the same month last year, after a 6.4 percent increase in the prior month. That June figure fell short of the 5.4 percent gain predicted by economists surveyed by Reuters.

After the announcement, the offshore yuan held steady, trading at around 7.179 against USD.

Speaking to CNBC, Frederic Neumann from HSBC, said there was “little perceived urgency” for further rate cuts since growth remained above target. “With interest rates already relatively low, further easing may be less effective in driving up demand than fiscal measures,” he added.

Neumann noted that the central bank might prefer to keep some “policy powder dry for the moment” and only cut rates further if the effect of US tariffs on exports from China intensifies. He also suggested that ongoing disinflationary pressures and relatively high interest rates could prompt additional support later on.

Demand might weaken in the 2nd half of 2025

In a note dated July 9, analysts at Nomura warned that while current indicators seem stable, fundamentals could weaken noticeably in the 2nd part of the year. They pointed to signs that demand might soften across several areas, asset prices may face renewed strain, and some ease might be observed in the market interest rates.

Given these risks, Nomura’s team said Beijing would “very likely rush to roll out a new round of supportive measures” before year‑end. They described a looming “demand cliff” driven by a slowdown in exports due to sales and US tariffs shortfalls.

Under these pressures, the analysts expect fiscal health in many cities to worsen and forecast that GDP growth will slow to about 4.0 percent year‑on‑year in the second half, down from roughly 5.1 percent in the first half.

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