China keeps lending rates steady; trade war raises bets for stimulus

Policymakers are also wary of a weakening Chinese yuan and shrinking interest margins at lenders, limiting the scope for easing

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China kept benchmark lending rates steady on Monday for the sixth successive month, matching market expectations.

Stronger-than-expected first-quarter economic growth data might have reduced the urgency for immediate monetary easing even as markets wager more stimulus is likely in coming months to keep growth on an even keel amid an intensifying Sino-U. S. trade war.

Policymakers are also wary of a weakening Chinese yuan and shrinking interest margins at lenders, limiting the scope for easing.

The one-year loan prime rate (LPR) was kept at 3.1 per cent, while the five-year LPR was unchanged at 3.6 per cent.

In a Reuters poll of 31 market participants conducted last week, 27, or 87 per cent, expected no change to either of the rates.

China's gross domestic product (GDP) grew 5.4 per cent in the first quarter, beating expectations, but markets fear a sharp downturn in the year ahead as US tariff policies pose the biggest risk to the Asian powerhouse in decades.

Export data was yet to capture the impact of higher US tariffs as many factories front-loaded their orders to beat the duties, analysts said.

A string of global investment banks have lowered their projections for China’s economic growth this year and expected more monetary easing measures to underpin the economy.