MNI PBOC WATCH: Oct LPR To Hold, Trump-Xi Meeting In Focus

China’s Loan Prime Rate (LPR) is likely to remain unchanged in October as the central bank holds the easing pace amid uncertainties from the economic slowdown and escalating China-U.S. trade tensions.

The LPR will stay at 3.0% for the one-year maturity and 3.5% for the five-year tenor and above on Monday. Both rates last fell in May by 10 basis points after the People’s Bank of China lowered the 7-day reverse repo rate – its benchmark policy rate – by 10bp to 1.4% on May 8, followed by a 50bp reduction in the reserve requirement ratio on May 15.

Third-quarter GDP data, due next Monday, is expected to drop below 5% as major indicators point to stronger headwinds, raising concerns about the momentum in Q4 and even in 2026, a critical year marking the start of China’s 15th Five-Year Plan.

Policy advisors expect Q3 GDP to expand by 4.8-4.9% y/y, slightly higher than analysts’ 4.7% estimate. Such growth would require at least 4.5% expansion in Q4 to meet the government’s “around 5%” annual target. (See MNI: China Advisors Eye 4.8% Q3 GDP Amid Slowing Momentum）

Liu Xiangdong, a researcher at the China Center for International Economic Exchanges, noted that Q4 growth faces pressure from weakening momentum amid fading policy effects and a higher comparison base. This could also mean that officials may need to secure 2026 growth through greater central government borrowing next year.

Xu Hongcai, deputy director at the China Association of Policy Science’s Economic Policy Commission, suggested a 50bp cut in the reserve requirement ratio and at least a 10bp reduction in the policy interest rate later this quarter.

TRADE RISKS

Advisors remain concerned about exports should the China-U.S. trade war escalate further, though they are cautiously optimistic about a potential meeting between the two state leaders later this month that could ease current tensions. (See MNI: Trump-Xi Meet Likely, But Any Deal Modest-China Advisors）

The possible meeting during the APEC summit in South Korea is expected to yield a short-term truce in the trade war, but prospects for a longer-term deal have faded following a recent escalation in frictions, advisors told MNI.

Zhao Yongsheng, a research fellow at the Institute of Regional and International Studies at the University of International Business and Economics, said China may be willing to relax rare earth export controls in exchange for U.S. moves to ease high-tech export restrictions, adding Beijing could also increase purchases of U.S. goods, including potentially hundreds of Boeing aircraft.

However, a former Ministry of Commerce official held limited expectations for U.S. concessions in the near term, saying these are unlikely to extend beyond the possible removal of a 20% tariff imposed in response to Chinese sales of fentanyl precursors.

Advisors also expect negotiators from both sides to meet soon to prepare for the potential encounter. A Ministry of Commerce spokesperson said Thursday that China remains open to talks based on “equality and mutual respect” when asked about another possible meeting between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng ahead of APEC.