China holds key interest rates steady amid trade tensions with US

(Sharecast News) - China's central bank held key interest rates unchanged on Thursday, in line with estimates amid trade tensions with the US. The People's Bank of China held the one-year loan prime rate (LPR) at 3.1%, and the five-year LPR at 3.6%. The rates affect lending from mortgages to business borrowing.

"China is holding its benchmark lending rates steady as the PBOC goes into full-on defense mode to protect financial stability amid a sharp acceleration in capital outflows," said Stephen Innes at SPI Asset Management.

"The yuan has been under siege, with foreign-exchange outflows surging last month as Trump's tariff rhetoric sent shockwaves through markets. While a chunk of this outflow likely flowed through the Shanghai-Hong Kong connect, domestic banks still dumped a net $39.2 billion in foreign currencies-the largest monthly bleed since July."

"Goldman Sachs puts the real damage closer to $82 billion, a tenfold explosion from December. If that doesn't scream 'capital flight', I don't know what does. No wonder the PBOC is holding the line."

PBOC governor Pan Gongsheng on Sunday told a conference in Saudi Arabia on Sunday that a stable yuan has been critical to maintaining global financial and economic stability.

US President Donald Trump has imposed a 10% tariff on all imports from China, on top of existing tariffs of up to 25%.

Reporting by Frank Prenesti for Sharecast.com