China cuts one-year benchmark lending rate by 10 basis points
- August 21, 2023
- Posted by: Quatro Strategies
- Categories: Business & Politics, China, Sanctions & Regulation
China’s central bank, the People’s Bank of China (PBOC), has reduced its one-year benchmark lending rate by 10 basis points to 3.45% as part of efforts to stimulate credit demand. However, in a surprise move, the PBOC decided to keep the five-year lending rate unchanged at 4.20%. This decision comes against a backdrop of concerns about the rapid weakening of China’s currency, the yuan.
China’s economy, the world’s second-largest, has been experiencing a slowdown due to a slump in the property market, weak consumer spending, and declining credit growth. These factors have prompted calls for additional policy stimulus to support economic recovery.
While the PBOC aims to boost economic activity, it faces challenges stemming from the weakening yuan. A further expansion of China’s yield differentials compared to other major economies could lead to capital flight and a sell-off of the yuan, limiting the central bank’s ability to ease monetary policy more aggressively.
The one-year loan prime rate (LPR) cut is expected to impact new and outstanding loans, while the unchanged five-year rate will influence mortgage pricing. Most analysts had anticipated rate cuts for both terms, with expectations of a larger cut for the one-year rate.
China’s currency, the yuan, has faced significant depreciation against the dollar this year, falling nearly 6%. This decline has positioned the yuan as one of the worst-performing Asian currencies.
Last week, the PBOC unexpectedly lowered its medium-term policy rate, and it has pledged to maintain ample liquidity and precise and forceful policies to support economic recovery in the face of increasing headwinds. However, the decision to leave the five-year lending rate unchanged has surprised traders and analysts, leading some to question the effectiveness of policy guidance and the tools available to stimulate the economy, particularly in the property sector.
The PBOC has also indicated its intention to optimize credit policies for the property sector and coordinate financial support to address local government debt issues. This suggests that China’s central bank is looking to balance the need for economic stimulus with concerns about financial stability and currency depreciation.
Interested in learning more?
Sign up for Top Insights Today
Top Insights Today delivers the latest insights straight to your inbox.
You will get daily industry insights on
Oil & Gas, Rare Earths & Commodities, Mining & Metals, EVs & Battery Technology, ESG & Renewable Energy, AI & Semiconductors, Aerospace & Defense, Sanctions & Regulation, Business & Politics.
Read more insights
Venezuela upheaval tests a market built on oversupply, not scarcity
Global markets began the first full week of 2026 absorbing a rare, high-impact geopolitical shock, the U.S. capture of Venezuelan President Nicolás Maduro, but the early price action suggested investors were not yet treating it as a systemic risk event.
Risk assets broadly held up as trading resumed after holiday-thinned sessions, while the more pronounced reaction showed up in classic hedges such as precious metals. Markets are trying to distinguish between headline-driven volatility and durable shifts in supply chains, energy flows, and policy.
Indian state refiners shift gears with surge in non-Russian oil purchases
India’s two largest state-run refiners, Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Ltd (BPCL), have collectively purchased over 22 million barrels of non-Russian crude oil for September and October delivery, signaling a major strategic shift under intensifying pressure from Washington to curtail imports of discounted Russian oil.
This marked increase in non-Russian spot purchases comes after both firms paused Russian crude deals in late July, following growing diplomatic pressure from the administration of U.S. President Donald Trump. Trump has openly criticized nations continuing to buy Russian oil, framing such purchases as indirectly funding Moscow’s war effort in Ukraine.
Copper, aluminum drop as Trump’s tariffs fuel global trade uncertainty
Copper and aluminum prices declined as investors weighed the impact of the Trump administration’s tariffs and signs of persistent weakness in China’s economy, raising concerns about global growth. The latest inflation data from China, released on Sunday, pointed to sluggish domestic demand, exacerbating worries over the country’s prolonged property crisis. Meanwhile, President Donald Trump acknowledged that the U.S. economy faces a “period of transition,” following heightened market volatility driven by his aggressive trade policies.
Copper extended its retreat from a four-month high, falling 1.1% to $9,512 per ton on the London Metal Exchange (LME). Other industrial metals followed suit, with aluminum and zinc also posting losses, while iron ore futures in Singapore slipped below the critical $100 per ton mark.