People's Bank of China Cuts One-Year and Five-Year Loan Prime Rates by 25 Basis Points Each

The People's Bank of China reduced both its one-year and five-year Loan Prime Rates by 25 basis points each on 21 October 2024, lowering the one-year LPR to 3.10% and the five-year LPR to 3.60%. The PBoC published the new benchmark rates on its website.

The Loan Prime Rates serve as the primary benchmark for new loans in China, with the one-year rate anchoring the majority of corporate and consumer lending and the five-year rate directly underpinning mortgage pricing.

PART OF STIMULUS PACKAGE

The rate cuts formed part of a broader stimulus package. Alongside the monetary measures, Beijing had signalled intentions to deploy complementary fiscal support, with officials from the National Development and Reform Commission and the Ministry of Finance having outlined spending and investment commitments in a series of press briefings held earlier in October.

Prior cuts to the LPR in 2024 had been narrower — a 25-basis-point cut to the five-year rate alone in February and 10-basis-point cuts to both rates in July.

MARKET REACTION

Mainland Chinese shares edged higher on the day, with the CSI 300 up 0.25%, while Hong Kong's Hang Seng fell about 1.6%; markets had rallied since late September, when PBoC Governor Pan Gongsheng first outlined the stimulus package at a press conference. The CSI 300 real estate index rose about 1%.