BANKS in China maintained their benchmark lending rates on Monday (Apr 22), following the Chinese central bank’s recent decision to stand pat on monetary policy.

The one-year loan prime rate was held at 3.45 per cent, in line with almost all of the forecasts from economists surveyed by Bloomberg News. The five-year rate, a reference for mortgages, was kept at 3.95 per cent as expected, according to data from the People’s Bank of China (PBOC).

China faces the challenge of stimulating the economy while keeping its currency stable as sticky inflation in the US pushes back rate-cut bets. Looser monetary policy can help boost growth but also exacerbate currency weakness and capital flight.

China withdrew cash from the banking system for a second consecutive month last week, signalling its caution towards monetary easing. The yuan is facing renewed depreciation pressure after a fresh round of hot US inflation bolstered the US dollar and Treasury yields.

The loan rates are based on the interest rates that 20 banks offer their best customers, and are published by the PBOC monthly. They are quoted as a spread over the central bank’s one-year policy rate, or the medium-term lending facility.

China is struggling to revive borrowing demand as the property market keeps slumping and consumer confidence remains anaemic. Credit growth continued to slow in March and banks extended fewer loans than expected.

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While China reported strong growth in the first quarter, the latest data show the bounce slowed in March, with the rise in retail sales and industrial output falling short of forecasts. Economists say more stimulus will be needed to reach the ambitious annual growth target of around 5 per cent. BLOOMBERG