China Holds LPR Steady to Support Yuan Amid Escalating Trade War with U.S.

China Holds LPR Steady to Support Yuan
Amid Escalating Trade War with U.S.

China's central bank has decided to keep its key loan prime rates (LPR) unchanged in a bid to maintain stability in the Chinese yuan, as trade tensions with the United States continue to intensify.

According to CNBC, the People’s Bank of China (PBOC) kept the 1-year LPR at 3.1% and the 5-year LPR at 3.6%. This decision underscores Beijing’s priority to stabilize the currency amid external economic pressure, including the risk of further U.S. tariff hikes on Chinese imports.

The move comes shortly after China released its latest economic data, showing that the country’s gross domestic product (GDP) grew by a stronger-than-expected 5.4% year-on-year in the first quarter—outperforming forecasts and signaling resilience in the face of external challenges.

The 1-year LPR serves as a benchmark for most corporate and household loans in China, while the 5-year LPR is primarily used as a reference for mortgage rates. Both rates have remained unchanged since October last year.

Following the rate announcement, the onshore yuan remained steady at around 7.2995 per U.S. dollar, while the offshore yuan appreciated slightly to approximately 7.2962 per U.S. dollar.

The decision to hold rates aligns with a Reuters survey of economists, in which 87% of respondents predicted that the PBOC would maintain current interest rates.

Dutch bank ING commented that while China’s inflation remains subdued and external pressures are mounting—especially as the U.S. considers raising tariffs even further—the central bank appears focused on maintaining currency stability. As a result, PBOC may wait until the U.S. Federal Reserve begins cutting rates before easing its own policy.

Currently, the United States imposes import tariffs on Chinese goods as high as 245%, while China maintains tariffs on U.S. imports up to 125%, reflecting a deepening trade rift between the world’s two largest economies.

Despite the solid GDP figures, China continues to face deflationary pressures. The Consumer Price Index (CPI) for March showed a 0.1% decline compared to the same period last year, indicating weak domestic consumption and underscoring the challenges ahead for the Chinese economy.