China lowered its benchmark lending rates on Tuesday in a renewed effort to stimulate economic activity amid persistent global uncertainties.
The one-year Loan Prime Rate (LPR) was cut from 3.10% to 3.00%, while the five-year LPR—commonly used to price mortgages—was reduced from 3.60% to 3.50%, according to the National Interbank Funding Centre. This is the first LPR adjustment of 2025 and is aimed at easing borrowing costs for businesses and households, reinforcing market confidence, and supporting steady growth in the real economy.
Analysts say the rate cuts reflect Beijing’s determination to stabilise expectations and revive domestic demand. The LPR serves as a key benchmark for pricing various loans, including those for consumers, businesses, and property buyers. Lower rates reduce financial burdens on borrowers, encouraging investment and consumption.
For instance, a standard commercial mortgage of 1 million yuan (approximately USD 140,000) over 30 years will now cost borrowers around 50 yuan less per month in interest, translating into savings of nearly 20,000 yuan over the loan’s lifetime.
The move had been widely anticipated. Earlier this month, People’s Bank of China Governor Pan Gongsheng announced a 0.1 percentage point reduction in the policy rate. The central bank followed up by cutting the seven-day reverse repo rate to 1.4%, laying the groundwork for the latest LPR adjustment.
These measures are part of China’s broader adoption of a moderately loose monetary policy in 2025. Authorities have reiterated their readiness to lower both reserve requirement ratios and interest rates in a timely manner to ensure ample liquidity and economic support.
In April, the average interest rate on newly issued corporate loans fell to approximately 3.2%, down 50 basis points year-on-year. Similarly, new residential mortgage rates dropped to an average of 3.1%, representing a 55-basis-point decline—both record lows.
This downward trend has extended to deposit rates as well. On Tuesday, major commercial banks trimmed deposit interest rates, with one-year fixed-term deposits falling by 15 basis points to 0.95%. Rates now stand at 1.05% for two-year deposits, 1.25% for three-year terms, and 1.30% for five-year savings.
Tian Xuan, President of the National Institute of Financial Research at Tsinghua University, noted that the coordinated reduction in lending and deposit rates is expected to stimulate credit demand and fuel consumption and investment—injecting fresh momentum into China’s economic recovery.
Recent official data shows the Chinese economy maintained stable growth during the first four months of 2025, buoyed by rising retail sales, a thriving services sector, resilient trade, and steady industrial output and fixed-asset investment.
