China's central bank Photo: CFP

China's benchmark lending rates for commercial banks remained unchanged for a third straight month in April, falling within analysts' expectations with a reserve requirement ratio (RRR) cut offering more space for financial institutions to make interest concessions to businesses, with maintaining China's monetary policy stability as an emerging market currency.

According to the People's Bank of China (PBC), China's central bank, the one-year loan prime rate (LPR) remains steady at 3.70 percent, and the five-year rate at 4.60 percent for a third consecutive month.

The central bank will continue to drive credit expansion to boost stable economic growth this year, but it will be a structural move instead of frequent interest rate cuts, according to a research report by analysts from Haitong Securities Co.

"Reducing funding costs will be carried out mainly through banks making interest concessions rather than constant decline in policy interest rate," the report noted. The central bank said in a regular report for the first quarter that banks in over 100 cities have reduced mortgage rates ranging from 20 to 60 basis points.

Cutting interest rates will not be a routine move, and the central bank may be more cautious in cutting the rate for medium-term lending facility and reverse repurchase, analysts said, noting that "we value normal monetary policy, as an emerging market currency, we need to balance internal and external factors."

On Tuesday, the central bank held a meeting, vowing to implement more financial policies to provide timely assistance to the real economy. The bank asked that financial institutions step up financial service support in key sectors including the service sector, logistics and the consumer economy, calling for measures including credit resource allocation and transfer pricing.

The PBC also pledged to deliver a full package of structural monetary policies and to effectively connect banks with businesses to maximum the effectiveness of new measures. 

The central bank said Monday that it had handed over 600 billion yuan ($93.78 billion) in surplus profits to the country's central budget as of mid-April, which will mainly be used to facilitate value-added-tax credit refunds and increase the central government's transfer payments to local governments.

On Friday, the bank announced a universal 25 basis point reduction in banks' reserve requirements, releasing about 530 billion yuan in capital.

The smaller-than-expected RRR cut epitomizes the central bank's policy orientation, as imported inflation concerns amid global uncertainties and renewed virus outbreaks point to a moderate - instead of aggressive - monetary tweak, experts noted.

Global Times