China’s CSI 300 index rose 0.43% on Monday as the People’s Bank of China (PBOC) froze its benchmark loan prime rates for a seventh straight month.
The onshore yuan held at 7.04 per dollar, with the offshore version at 7.03. This came despite weak demand and a property slump hitting the world’s second-largest economy.
The PBOC kept its one-year rate at 3% and five-year rate at 3.5%, matching Reuters forecasts. Loan prime rates are steady. The one-year guides most loans; the five-year sets mortgages.
November data fell short of expectations. Retail sales grew 1.3% year on year, missing 2.8% estimates and down from 2.9% in October. Industrial output rose 4.8% versus the predicted 5%, per National Bureau of Statistics.
Property woes continued to weigh on growth. Fixed-asset investment fell 2.6% in January-November, worse than forecast. New-home prices in tier-1 cities dropped 1.2%, and resales plunged 5.8%. Sales by floor area shrank 14.2%, Reuters reported.
Eswar Prasad, Cornell trade policy professor, told CNBC of the PBOC’s pause that “some stimulus will help,” but with private sector weakness, “monetary policy probably won’t get that much traction.”
“With growth momentum weakening, they’re going to have to turn on the stimulus taps, some monetary stimulus, perhaps, and ideally a little more fiscal stimulus, but that really needs to be packaged with some broader reforms,” Prasad said.
Responses include 2026 ultra-long bonds for infrastructure, per the finance ministry announcement, and vows to “vigorously support the implementation of special actions to boost consumption” against deflation, with CPI at -0.5%. A U.S. trade deal could aid the 5% GDP target after Q3’s 4.6% growth.