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China keeps lending benchmark LPR steady for fifth straight month

FILE PHOTO: The Chinese national flag flies at half-mast at the headquarters of the People's Bank of China, the central bank (PBOC), as China holds a national mourning for those who died of the coronavirus disease (COVID-19), on the Qingming tomb-sweeping festival in Beijing, China April 4, 2020. REUTERS/Carlos Garcia Rawlins

SHANGHAI (Reuters) - China kept its benchmark lending rate for corporate and household loans steady for the fifth straight month at its September fixing on Monday, as expected.

The one-year loan prime rate (LPR) CNYLPR1Y=CFXS was kept unchanged at 3.85%, while the five-year LPR CNYLPR5Y=CFXS remained at 4.65%.

Most new and outstanding loans are based on the LPR, while the five-year rate influences the pricing of mortgages.

Thirty-one out of 35 traders and analysts, or nearly 90%, in a snap Reuters poll conducted last week saw no change to either the one-year or the five-year LPR.

The rate decision came after the People’s Bank of China (PBOC) kept the borrowing cost on medium-term lending facility (MLF) loans unchanged for the fifth straight month.

MLF, one of the PBOC’s main tools in managing longer-term liquidity in the banking system, serves as a guide for the LPR.

Recent economic data showed that the world’s second-largest economy has steadily recovered from a virus-induced slump, but analysts say policymakers face a tough job sustaining stable expansion over the next few years.

China’s economy remains resilient and there are ample policy tools at Beijing’s disposal, despite rising external risks, President Xi Jinping said in remarks published on Saturday.

The LPR is a lending reference rate set monthly by 18 banks. The PBOC revamped the mechanism to price LPR in August 2019, loosely pegging it to the MLF rate.

Reporting by Winni Zhou and Andrew Galbraith; Editing by Sam Holmes

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