China is widely expected to keep its benchmark lending rates unchanged for a seventh straight month in December, according to a Reuters survey, despite ongoing economic weakness and persistent stress in the property sector.
Analysts say the People’s Bank of China is not rushing to ease monetary policy, as the economy remains on track to meet this year’s growth target and commercial banks continue to face record-low profit margins. However, economists broadly expect fresh interest rate cuts to emerge in early 2026.
All 25 respondents surveyed by Reuters said they anticipate the one-year and five-year loan prime rates (LPRs) will remain steady on Monday at 3.0% and 3.5%, respectively.
The outlook follows the central bank’s decision earlier this month to leave its seven-day reverse repo rate unchanged at 1.4%, a key policy rate that anchors LPR settings.
China’s economic momentum weakened in November, with factory output and retail sales growth slowing as the prolonged property downturn continued to weigh on both consumer and business confidence.
Although China’s trade surplus exceeded $1 trillion during the first 11 months of 2025, exporters are expected to face a more challenging environment in 2026 amid rising global trade tensions.
Market participants warn that further rate cuts would intensify pressure on banks’ net interest margins, which have already fallen to a record low of 1.42%. A Shanghai-based bank trader noted that lowering LPRs now would reduce mortgage rates at the start of next year, further straining bank profitability.
Economists also point out that policymakers see little urgency to cut rates while the world’s second-largest economy remains on course to achieve Beijing’s 2025 growth target of around 5%.
Looking ahead, Citi analysts expect China to resume monetary easing as early as January 2026, while ING forecasts additional policy support in the early months of next year. China Post Securities predicts rate cuts of around 20 basis points in the first half of 2026, and Citic Futures sees reductions of 10 to 20 basis points later in the year.
Loan prime rates are set each month after 20 designated commercial banks submit rate quotes to the central bank. The one-year LPR serves as the benchmark for most corporate and household loans, while the five-year LPR plays a key role in determining mortgage pricing.
