People’s Bank of China loan rates setting coming up soon

Coming up on Friday, 20 October we get the Loan Prime Rate setting from the People’s Bank of China.

Earlier this week we had the Medium-term Lending Facility (MLF) rate remain unchanged:

The MLF rate is a benchmark interest rate that banks in China can use to borrow funds from the People’s Bank of China for a period of 6 months to 1 year, medium-term liquidity to commercial banks. Changes to the rate are strongly indicative of change to the monthly Loan Prime Rate (LPR) setting on the 20th of each month, today.

Current LPR rates:

  • 3.45% for the one year
  • 4.20% for the five year

I expect no change in either.

The PBOC’s Loan Prime Rate (LPR):

  • It is an interest rate benchmark used in China, set by the People’s Bank of China each month.
  • The LPR serves as a reference rate for banks when they determine the interest rates for (primarily new) loans issued to their customers.
  • Its calculated based on the interest rates that a panel of 18 selected commercial banks in China submit daily to the PBOC.
    • The panel consists of both domestic and foreign banks, with different weights assigned to each bank’s contributions based on their size and importance in the Chinese financial system.
    • The LPR is based on the average rates submitted by these panel banks, with the highest and lowest rates excluded to reduce volatility and manipulation. The remaining rates are then ranked, and the median rate becomes the LPR.
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