PBOC Survey: China's LPR reform yields fruitful results

According to a survey of 150 banks conducted by the People’s Bank of China (PBOC), the central bank’s Loan Prime Rate (LPR) reforms have been effective for the financial institutions and also for the transmission efficiency of market interest rates.

Key findings

“Banks of all types have been actively promoting the use of the LPR mechanism, with loans priced against this benchmark accounting for a bigger share of their new lending.

LPR-based loans issued by urban commercial banks and rural commercial banks reached 92 percent and 86.1 percent of their total lending in December 2019, respectively.

The LPR mechanism, revamped in August 2019 to better reflect market changes, has steered lending rates lower and smoothed the transmission of market interest rates to loan interest rates.

Financial institutions, however, still face difficulties in fully leveraging the LPR mechanism.”

Market reaction

The above key points have little to no impact on the Yuan markets, as USD/CNY keeps the bid tone intact while trading at 7.1185. The spot hit a daily low of 7.1153in the last minutes.