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China's capital city is home to a large and diverse population. After shocking investors by declining to lower medium-term lending rates last week, a Reuters survey predicts that China will leave benchmark lending rates constant at its monthly fixing on Monday.
A survey conducted after Vice Premier Liu He announced on Wednesday that Beijing will implement further steps to boost the Chinese economy, however, indicated that people's expectations for budget cutbacks had increased.
Nearly three-quarters of the 36 financial firms polled by Reuters predicted China's one-year loan prime rate (LPR) and the five-year rate to remain unchanged at the March fix.
Fifteen of those polled said they expected the five-year rate would fall by 5 basis points, but that the one-year rate would remain the same.
According to a Chinese bank dealer, "I suspect they'll cut the five-year since the one-year follows the MLF." As a means of stabilizing the housing market, they're more concerned with lowering the five-year rate.
Due to rising threats to the country's economic outlook, such as the ongoing crisis in Ukraine and a sluggish property market, the central bank shocked investors on Tuesday by not decreasing its one-year medium-term lending facility (MLF) rate.
Other respondents projected a wide range of cutbacks based on market uncertainties.
One-year rates were decreased by five basis points by four respondents, but not by the five-year rate, and 10 basis points by six respondents.
Investors believe that Liu's statements have increased the probability of more easing measures, particularly as China suffers with a growing COVID-19 epidemic, regardless of whether Monday's correction delivers a decrease.
Analysts at ING believe that "semi-lockdowns" might be imposed on more cities as a result of tight social distancing measures.
For small and medium-sized businesses, "we expect the central bank to respond with targeted (reserve requirement ratio) reductions."
While the one-year LPR is the most widely used in China, the five-year rate is used in the pricing of house loans.
After a 5-basis-point decrease in January, the one-year LPR is 3.7 percent, while the five-year LPR is 4.6 percent following a 5-basis-point cut in December.
LPR is determined on the 20th of each month by the MLF, which serves as a guidance.
