The People's Bank of China issues the benchmark lending rate decision.

The People's Bank of China, led by Governor Pan Gongsheng, announced early on Wednesday morning that it would keep the Loan Prime Rate (LPR) unchanged, continuing to provide direct support for mortgage rates in an effort to revive demand in the debt-laden sector and bolster economic growth.

According to the issued statement, the People's Bank of China has maintained the one-year Loan Prime Rate at 3.10% as expected, and has also kept the five-year LPR at 3.60%, also as anticipated, after reducing both rates by 25 basis points in October.

The decision made by the People's Bank of China on Wednesday to maintain the five-year LPR follows reports from some government-affiliated Chinese media yesterday, indicating that some of their sources suggested the People's Bank intends to cut the reserve requirement ratio (RRR) for banks again this year, to provide more liquidity in the economy and stimulate domestic demand.

It is worth mentioning that the Loan Prime Rate (LPR) set by the People's Bank of China is the benchmark interest rate used in China, which the bank decides on every month, usually set on the 20th day of the month, barring any holidays, and the new LPR takes effect from the first day of the following month.

The LPR serves as a reference rate for banks when determining interest rates on loans to their customers. It is calculated based on the interest rates offered daily by a committee made up of 18 selected commercial banks in China to the People's Bank of China.

The committee consists of both domestic and foreign banks, with different weights assigned to each bank's contributions based on its size and significance in the Chinese financial system. The LPR is determined by the average rates submitted by these banks, excluding the highest and lowest rates to minimize volatility and manipulation, and then the remaining rates are ranked, resulting in the average rate being the LPR.