China lending benchmarks seen holding steady as easing bets fade

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China lending benchmarks steady

Highlights

A Reuters survey of 22 market participants unanimously expects China to keep the one-year LPR at 3.00% and five-year LPR at 3.50% at Tuesday's review.
Third-quarter GDP beat expectations, reducing pressure for additional near-term stimulus, but structural imbalances persist as export strength offsets weak consumer spending.
China's new home prices declined again in September, prolonging a three-year slump and signaling continued weakness in the property sector despite policy support.

October rate outlook and policy signals

As reported by Reuters, a survey of 22 market participants conducted this week shows unanimous expectations that China will keep both benchmark loan prime rates unchanged at Tuesday's review. Respondents expect the one-year LPR to remain at 3.00% and the five-year LPR to stay at 3.50%.

The LPR, typically charged to banks' most creditworthy clients, is set each month after 20 designated commercial banks submit proposed rates to the People's Bank of China. The steady outlook follows third-quarter GDP data that came in better than expected, easing pressure for additional near-term stimulus.

Investors are also watching a key financial forum in Beijing later on Monday, where PBOC Governor Pan Gongsheng is due to speak. His remarks may offer further clues on the direction of monetary policy as markets assess whether officials see a need for more support later this year.

Growth mix and pressure points for the economy

China's economy is rebounding from three-year lows in the third quarter, with strong exports helping offset still-cautious consumer spending. Analysts, however, warn that heavier reliance on external demand is deepening structural imbalances in the economy.

Market participants expect Beijing to meet its 2026 growth target of 4.5% to 5.0% without deploying major new stimulus, supported by a strong start to the year and modest recent fiscal and monetary measures. The consensus for unchanged lending benchmarks also comes as some major economies lean toward tighter monetary policy to curb inflation, while China's long-dated bond yields hover near a 15-month low.

At the same time, the property sector remains a drag. New home prices in China fall again in September, extending a slump of more than three years and indicating that policy support has yet to trigger a broad recovery in housing demand.

Our earlier report on expectations for a modest pickup in China’s third-quarter growth covered how recent policy support—including targeted rate cuts, mortgage subsidies, and the release of unused local government debt quotas—was aimed at stabilizing activity. It also highlighted that export strength and factory output were offsetting weak domestic demand, while the prolonged property slump and cautious consumption kept growth near the lower end of Beijing’s target range.

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