China’s central bank has decided to keep its lending rates steady as it grapples with a weakening yuan and the impact of the ongoing trade war with the United States. The People’s Bank of China announced on Friday that it would maintain the one-year loan prime rate (LPR) at 4.2% and the five-year LPR at 4.85%.
This decision comes as the Chinese economy continues to face challenges, including slowing growth and a devaluation of the yuan. The yuan has weakened significantly against the US dollar in recent months, reaching a 10-year low in August. This depreciation has raised concerns about capital outflows and prompted fears of a potential currency war with the US.
In response, the central bank has been taking measures to stabilize the yuan and support the economy. In addition to keeping lending rates steady, the bank has also injected liquidity into the financial system and cut reserve requirements for banks. These measures are aimed at boosting lending and stimulating economic activity.
Despite these efforts, China’s economy is still facing headwinds. The trade war with the US has taken a toll on Chinese exports and business confidence, leading to a slowdown in manufacturing and investment. In addition, domestic demand has been weakening, with consumer spending and property sales showing signs of softening.
To counter these challenges, the Chinese government has been implementing a range of stimulus measures, including tax cuts, infrastructure spending, and monetary easing. However, policymakers are also wary of the risks of excessive stimulus, such as rising debt levels and asset bubbles.
Overall, China’s decision to hold lending rates steady reflects its cautious approach to managing economic risks while supporting growth. The central bank will continue to monitor the situation closely and adjust its policies as needed to ensure stability and sustainable development.