China leaves benchmark rates unchanged

China's central bank left the cost of borrowing unchanged on Friday, as the country’s economy showed signs of stabilising.

The People’s Bank of China announced no change to the one-year loan prime rate (LPR), at 3.45%, and no change to the five-year LPR of 4.20%. The decision was widely expected.

Earlier in the week the PBoC had kept the one-year medium-term lending facility rate steady at 2.5%. Both interest rates tend to move in lockstep.

The decision followed a slew of data released earlier in the week showing the country’s economy - which has been hit hard by stringent Covid lockdowns, a property sector slump and weaker global demand - was starting to pick up.

GDP growth rose to 1.3% in the third quarter, from a 0.5% uptick in the second. The market had pencilled in a rise closer to 0.9%. Retail sales growth was also better than expected, rising to 5.5% in September from 4.6% in August. Analysts had forecast a 4.9% improvement.

However, the embattled real estate sector, which accounts for nearly a quarter of economic output, fared less well, with property investment falling 9.1% in the first nine months of the year.

Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics, said: "The encouraging September and third-quarter economic and credit data reduce the likelihood of another LPR cut by the year end.

"China’s recovery is still fragile and uneven, which means that more fiscal and monetary policy support will likely be needed, including financing support for developers to complete housing projects."

Richard Hunter, head of markets at Interactive Investor, said: "Benchmark lending rates were held steady, suggesting some signs of stability in the economy.

"Even so, the challenges are well known, not least of which in the country’s embattled property sector, where investors are still pinning hopes of general stimulus to ignite a sustained recovery."