In August the People's Bank of China (PBOC) reformed its method for setting LPR to improve the transmission of its monetary policy and lower the cost of financing, making LPR the pricing benchmark for all types of loans by commercial lenders instead of its lending rate.
LPR, which is linked to PBOC's medium-term lending facility (MLF), is the average of prices submitted by 18 banks, and currently comprises two varieties, a 1 year and a 5 year.
LPR is published on the 20th of each month, and if this falls on a weekend or holiday, LPR is published the following day.
LPR is published on the 20th of each month, and if this falls on a weekend or holiday, LPR is published the following day.
On Aug. 20 LPR was published for the first time since the reform and set at 4.25 percent, 6 basis points below the 4.31 percent it had been since it was first introduced in October 2013, and 10 points below the lending rate of 4.35 percent. The 5-year LPR was set at 4.85 percent.
On Sept. 19 LPR was published for the second time at 4.20 percent for a decline of 5 basis points.
Earlier today Yi Gang, PBOC governor, said in Washington DC that China would continue to pursue a prudent monetary policy and recent policy measures, such as three cuts to the reserve requirements for banks and the market-based reform on interest rates, had achieved desired results.
This includes stable growth of money supply and credit and low market interest rates, and the transmission mechanism for monetary policy will be improved further to reduce firms' funding cost and promote high-quality economic growth.
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