The Repo Rate Shift: A Double Edged Sword for Chinese Banks The recent decision by some major Chinese commercial banks to price corporate loans against short term interbank repo rates rather than the benchmark loan prime rate (LPR) has sent shockwaves through the financial sector.
This shift appears to be a response to growing pressure on net interest margins, which have been steadily declining since 2016.
The average net interest margin for Chinese commercial banks plummeted to a record low of nearly 1. 4% in the first quarter, according to official data. This is well below the 1.