FINANCE

China Pilots First Loans Pegged to Money-Market Rate

Published: Jul. 24, 2026 4:41 p.m. GMT+8

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Three major Chinese lenders have issued the country’s first loans pegged to a key money-market rate, breaking the years-long monopoly of the national loan prime rate (LPR) in pricing credit.

The pilot program, rolled out Monday in the southern island province of Hainan, marks a pivotal step in China’s interest rate liberalization.

By shifting to the depository institution repo rate (DR), the central bank aims to align with global practices and make borrowing costs more responsive to market liquidity.

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Three Chinese lenders issued first DR-pegged loans in Hainan pilot.
Loans of 91.7 million yuan went to state-owned and foreign enterprises.
DR rate, based on interbank deals, is more market-responsive than the flat LPR.

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Who’s Who

Industrial and Commercial Bank of China: Industrial and Commercial Bank of China (ICBC) was among the first three Chinese lenders to issue loans pegged to the DR rate in a Hainan pilot program. This marks a step in interest rate liberalization, shifting from the LPR to align borrowing costs with market liquidity.

China Merchants Bank: China Merchants Bank, a major Chinese lender, participated in issuing the first DR-pegged loans as part of a pilot program in Hainan. This marks a shift from the loan prime rate (LPR) to a more market-driven benchmark, aligning with China’s interest rate liberalization efforts.

Shanghai Pudong Development Bank: Shanghai Pudong Development Bank issued China's first loans pegged to the depository institution repo rate (DR) in Hainan, as part of a pilot program. The 91.7 million yuan loans aim to make borrowing costs more market-responsive, shifting from the loan prime rate (LPR).

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