The Loan Prime Rate (LPR) is China's benchmark lending rate, set monthly by the People's Bank of China (PBOC). The 1-year LPR serves as the reference rate for most commercial and consumer loans.

Why It Matters

The LPR replaced the older benchmark lending rate in 2019 as part of China's interest rate reform. Changes to the LPR directly affect borrowing costs for businesses and consumers across China.

How It Works

The LPR is calculated from quotes submitted by 18 designated banks, based on the Medium-term Lending Facility (MLF) rate plus a spread. The PBOC influences the LPR indirectly by adjusting the MLF rate.

Market Impact

LPR cuts signal the PBOC is easing to support growth, which can boost Chinese equities but pressure the yuan. Rate holds or hikes suggest prioritizing financial stability.