Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

China cuts lending benchmark, market sees more easing in 2022

Economy Dec 19, 2021 10:40PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: People wearing face masks walk past the headquarters of Chinese central bank People's Bank of China (PBOC), April 4, 2020. REUTERS/Tingshu Wang/File Photo

SHANGHAI (Reuters) - China cut its lending benchmark loan prime rate (LPR) for the first time in 20 months on Monday, in a bid to prop up growth in the slowing economy, although it remains wary of loosening conditions in the country's highly leveraged property market.

The one-year LPR was lowered by 5 basis points to 3.80% from 3.85% previously, while the five-year LPR remained at 4.65%.

The reduction marks the first LPR cut since April 2020.

Twenty-nine out of the 40 traders and economists polled by Reuters last week predicted cuts in LPR.

Most new and outstanding loans in China are based on the one-year LPR while the five-year rate influences the pricing of home mortgages.

"The cut reinforces our view that authorities are increasingly open to cutting interest rates amid looming economic headwinds," said Xing Zhaopeng, senior China strategist at ANZ.

However, he noted the decision to keep the five-year rate unchanged showed Beijing preferred "not to use the property sector to stimulate economic growth."

Some analysts said the central bank's two reserve requirement ratio (RRR) cuts this year have allowed institutions to lower their costs of lending, with the two cuts saving banks up to 28 billion yuan ($4.39 billion), according to Goldman Sachs (NYSE:GS)' estimates.


While Beijing's move to lower the LPR was widely expected, it highlights China's monetary policy divergence from other major central banks, which are set to raise interest rates.

Some analysts expect Beijing could ease further to arrest the economic slowdown, although they remain divided over the easing trajectory.

A slew of recent economic indicators, including retail sales and investment growth, point to a slowing economy, while a regulatory clampdown on the tech sector has dampened investor sentiment. New curbs to fight rising COVID-19 cases could further pressure growth.

"We expect a further 45 bp of cuts to the one-year LPR during 2022," Mark Williams, chief Asia economist at Capital Economics, said in a note.

ANZ's Xing expects another RRR cut in early 2022 amid mounting credit risks in the property sector.

Yan Se, chief economist at Founder Securities, said China's central bank lowered its interest rates by a smaller margin than global peers during the height of the pandemic last year, giving it room for additional easing now.

He expects Beijing to lower interest rates on the central bank's medium-term lending facility (MLF) by 10 bps in the first quarter of 2022, followed by more LPR reductions.

However, Li Wei, senior economist for China at Standard Chartered (OTC:SCBFF), expects no broad-based RRR cut or policy rate cuts in 2022.

"We maintain our call for no change in the seven-day reverse repo rate and the one-year MLF rate in 2022, as major central banks are expected to tighten monetary policy and China's CPI should trend higher on PPI passthrough and rising pork inflation," Li said.

($1 = 6.3781 Chinese yuan)

China cuts lending benchmark, market sees more easing in 2022

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
dar dar
dar dar Dec 19, 2021 9:25PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
wash rinse and repeat
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email