China kept its key interest rate unchanged for the 17th consecutive month, which came in line with analysts’ expectations. The Chinese Central announced that the interest rate on initial loans for one year will remain at the level of 3.85%, while the interest rate on initial loans for five years will remain at the level of 4.65%.
The last time the interest rate on the one-year and 5-year primary loans was lowered was in April 2020, at which time the interest rate on the one-year loan was reduced by 20 basis points and the interest rate on the 5-year loan was reduced by 10 basis points.
Markets were expecting to maintain interest rates today after the Chinese central bank kept the interest rate on its medium-term lending mechanism unchanged earlier this month.
It is reported that the interest on initial loans is determined on a monthly basis on the basis of requests submitted by 18 banks to the Central Bank of China, although the central bank has the authority to set the interest. This mechanism was used to set interest rates in China as an alternative to the traditional mechanism in August 2019.