China keeps benchmark lending rates unchanged for 12th straight month

China kept its benchmark lending rates unchanged for a 12th straight month on May 20, leaving the one-year loan prime rate at 3.00% and the five-year rate at 3.50%. The decision matched expectations across a survey of 20 market participants and signaled that Beijing is still choosing restraint over a broad-based easing campaign.

The move underscored a central dilemma for policymakers at the People’s Bank of China: they want to steady growth without stoking fears of panic or adding to debt distortions. The seven-day reverse repo rate, the policy anchor for loan prime rate pricing, also remained unchanged this year, reinforcing the message that the central bank is not preparing an immediate cut. Instead, officials appear intent on waiting for more evidence that recent support measures are feeding through to the economy.

That caution comes against a softer backdrop. China’s April retail sales rose just 0.2% from a year earlier, the weakest pace since December 2022, while industrial output increased 4.1%, below market expectations of 5.9%. Urban fixed-asset investment contracted 1.6% in the first four months of the year, and property investment fell 13.7% through April, a reminder that the housing slump is still dragging on demand. Urban unemployment edged down to 5.2% in April from 5.4% in March, but the broader picture still points to uneven momentum.

The central bank’s first-quarter monetary policy report, released in mid-May, said moderately loose policy continued to show effects, financial aggregates expanded at a reasonable pace and social financing conditions remained accommodative. It said operations in the first quarter produced a net injection of about 2 trillion yuan in medium- and long-term funds. Lending to technology, green development, inclusive finance, elderly-care services and the digital economy all posted double-digit growth at the end of March, while outstanding loans to sci-tech small and medium-sized enterprises rose 20.9% from a year earlier.

That backdrop helps explain why analysts see Beijing leaning toward targeted fiscal support, especially infrastructure spending, rather than a forceful interest-rate push. Huatai Securities pointed to the central bank’s revised policy language, which added an emphasis on targeted and effective monetary support and stronger endogenous growth drivers. TD Securities said the inflation backdrop looked less comfortable, with producer prices under pressure, making officials hesitant to ease too aggressively while domestic demand remains weak.