China is widely expected to hold its benchmark loan prime rates steady for a 15th consecutive month in August, according to a Reuters survey of 25 market participants. The one‑year and five‑year rates are projected to remain at 3.00% and 3.50%, respectively.

Why the rates are likely to stay flat

The loan prime rate (LPR) is set each month after 20 designated commercial banks submit their proposed rates to the People’s Bank of China (PBOC). Survey respondents said there is little sign of an outright cut at the next review, scheduled for Thursday.

Recent economic data from July, including industrial output, retail sales, and credit lending, indicated weak domestic demand across the world’s second‑largest economy. Analysts suggest policymakers will lean on faster fiscal implementation rather than further monetary easing to support growth.

Fiscal policy takes the lead

China’s leaders pledged at the July Politburo meeting to accelerate fiscal spending on already‑budgeted infrastructure projects for the remainder of the year, rather than launching major new stimulus measures. Citi analysts noted that “focus should remain on fiscal policies” and that there is little indication the PBOC will cut the LPR this month.

The central bank has said it will maintain an appropriately loose monetary stance and roll out practical, effective measures as needed, but stopped short of signaling explicit cuts to policy rates or the banks’ reserve‑requirement ratio.

Bank health shows modest improvement

Commercial banks’ net interest margin (NIM), a key gauge of sector health, edged up 0.01 percentage point to 1.41% in the second quarter, marking the first quarterly increase since 2022, though it remains near a record low.

Overall, the expectation of a steady LPR reflects a balance between modest fiscal stimulus and a cautious monetary approach as China navigates renewed economic weakness.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.