China set to keep loan rates steady for 16th consecutive month in September

China is set to maintain its benchmark lending rates steady for the 16th consecutive month in September, according to a Reuters survey. The policy remains cautious amid a shift toward tighter monetary policy by major global central banks. The loan prime rate (LPR) for one-year and five-year terms is expected to stay at 3.00% and 3.50%, respectively, in the upcoming review on Sunday.

All 21 surveyed market participants predicted no change in the LPR settings. Other global central banks have tightened policies to curb inflation. Citi analysts expect the People's Bank of China (PBOC) to hold LPRs unchanged again in September. The yield premium on 10-year U.S. Treasuries over Chinese government bonds is near a record high following the Federal Reserve's recent interest rate hike.

Despite this, the Chinese yuan continues its gradual appreciation against the dollar. Central bank governor Pan Gongsheng recently stated that China's loan growth is becoming the new norm, as shrinking property and local government sectors reduce credit demand faster than emerging industries can compensate. In August, China's new bank loans returned to positive territory but fell short of forecasts following a sharp contraction in July, as weak demand from households and corporations continues to dampen credit growth.