China’s central bank kept its loan prime rates (LPRs) unchanged on Tuesday, signaling a focus on targeted support for specific sectors rather than broad policy easing to bolster a slowing economy.
The People’s Bank of China maintained the 1-year and 5-year LPRs at 3% and 3.5%, respectively, marking the eighth consecutive month without a change. The 1-year rate guides most new and outstanding loans, while the 5-year benchmark influences mortgages.
The decision comes as the world’s second-largest economy lost momentum in the final quarter of 2025, growing just 4.5% year-on-year—the slowest pace since China reopened after stringent COVID-19 restrictions in late 2022.
Nominal GDP, a key gauge of corporate profitability and household income, remained below 4% for the third straight year, reaching 3.8% in Q4, according to Barclays economists. This marked the lowest level in 50 years outside the pandemic-affected 2020.
The GDP deflator, which measures price changes in goods and services, has stayed negative for 11 consecutive quarters, with the central bank expecting deflation to persist throughout 2026. Retail sales growth fell to a three-year low of 0.9% in December, reflecting weak household confidence amid a prolonged housing slump, a sluggish job market, and entrenched deflation.
At a press conference Tuesday, China’s state planner emphasized that policymakers will continue to pursue “more proactive fiscal policies” and a “moderately loose monetary policy” aimed at supporting a recovery in prices.
If you want, I can also make a shorter, punchier version suitable for a financial news headline feed that highlights the slowdown and deflation risk. Do you want me to do that?
Explore more exclusive insights at nextfin.ai.
