The People's Bank of China decided on December 28th 2019 to start using the key loan prime rate (LPR) as a new benchmark for pricing outstanding floating-rate loans. From January 1st 2020, financial institutions will not be allowed to sign floating-rate loan contracts that are priced in the old rates but should use the LPR instead. The move is expected to lower borrowing costs and is seen as another measure toward interest-rate liberalisation. The one-year LPR is at 4.15% and the 5-year LPR, generally used for new mortgage loans, at 4.8%. The central bank last cut the two rates by 5bps each last month, aiming to reduce lending costs and boost a slowing economy. Since the one-year LPR became the official key rate in August 2019, it was already cut 3 times. Interest Rate in China averaged 4.67 percent from 2013 until 2020, reaching an all time high of 5.77 percent in April of 2014 and a record low of 4.15 percent in November of 2019. source: People's Bank of China
Interest Rate in China is expected to be 3.95 percent by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate Interest Rate in China to stand at 3.65 in 12 months time. In the long-term, the China Loan Prime Rate is projected to trend around 4.00 percent in 2020, according to our econometric models.