China’s Steady Rates Signal Cautious Policy Amid Global Shifts

China’s decision to maintain its benchmark lending rates unchanged on September 22, 2025, underscores a cautious monetary policy stance, even as the U.S. Federal Reserve lowered its rates by a quarter percentage point. The People’s Bank of China (PBOC) kept the one-year loan prime rate (LPR) at 3.0% and the five-year LPR at 3.5%, marking the fourth consecutive month without adjustments. This move, reported by CNBC, aligns with economists’ expectations that Chinese authorities would prioritize stability over immediate stimulus, despite signs of economic slowdown. This article explores the implications of China’s steady rates for global markets, the underlying economic challenges, and potential future policy shifts.

China’s economy is showing signs of strain, with export growth slowing to 4.4% in August 2025, the lowest since February, as noted in the CNBC report: “The country’s export growth slowed to 4.4% in August, marking their lowest growth rate since February, as the impact of frontloading shipments waned and the U.S. trade policy targeting transshipment weighed on exports to third countries.” This deceleration reflects challenges from U.S. trade policies and waning global demand. Despite these pressures, the PBOC’s decision to hold rates steady suggests confidence in the recent stock market rally and a reluctance to deploy significant stimulus prematurely. The central bank’s last rate cut in May, reducing rates by 10 basis points, was a measured step to support growth, but the current pause indicates a wait-and-see approach as policymakers assess global and domestic conditions.

China’s steady rates contrast with the Fed’s easing, creating a complex dynamic for global capital markets. The unchanged one-year LPR, which influences most loans, and the five-year LPR, tied to mortgages, signal that Chinese authorities are prioritizing financial stability over aggressive stimulus. “The Monday decision came in line with economists’ expectations that Chinese authorities would hold off major stimulus measures amid a recent stock market rally, despite a string of economic data showing signs of fatigue in the economy,” CNBC reported. For investors, this could temper expectations for immediate market boosts in indices like the China A50, while forex markets, particularly USD/CNY, may see increased volatility as the U.S.-China rate differential widens. The PBOC’s decision to maintain the seven-day reverse repo rate last week further reinforces this cautious stance, potentially impacting global investor sentiment toward Chinese equities.

Looking ahead, Chinese policymakers are expected to introduce marginal monetary easing later in 2025 to achieve the government’s 5% annual growth target. “Chinese policymakers are expected to roll out marginal monetary easing later this year to ensure the world’s second-largest economy hits the government’s annual growth target of around 5%,” according to CNBC. This could involve targeted rate cuts or liquidity measures to support sectors like manufacturing and real estate, which have faced headwinds. For global markets, any easing could bolster confidence in Chinese equities and commodities, particularly if synchronized with improving global demand. However, the timing and scale of these measures remain uncertain, as China balances domestic growth needs with external pressures like U.S. trade policies and global monetary shifts.