China’s central bank, the People’s Bank of China (PBOC), opted to keep its benchmark lending rates unchanged for a seventh consecutive month on Monday, maintaining the one-year Loan Prime Rate (LPR) at 3.00% and the five-year LPR at 3.50%, in line with unanimous expectations from a Reuters poll of 25 market analysts conducted last week.

This decision, the longest streak of stability since the LPR system’s inception in 2019, underlines a cautious monetary policy stance aimed at balancing growth support with financial stability, even as recent data highlights softening domestic demand and persistent property sector woes. The one-year LPR serves as the primary reference for most new corporate and household loans, while the five-year rate heavily influences mortgage pricing—a critical lever in addressing the ongoing real estate slump.

Despite the hold, effective lending rates for new loans have continued to trend lower, hovering at historic lows due to prior PBOC guidance and targeted relending facilities, with average corporate loan rates dipping to around 3.5% in Q3 2025.

The last adjustments occurred in May 2025, when both rates were trimmed by 10 basis points amid efforts to revive post-pandemic recovery.

November’s economic indicators painted a mixed picture, prompting calls for more stimulus but not immediate action. Industrial output expanded by 4.8% year-on-year, a slight deceleration from October’s 4.9% and below the 5.0% consensus forecast, reflecting weaker manufacturing amid subdued external demand.

Retail sales growth slowed sharply to 1.3% from 2.9%, the weakest since August 2024, hampered by cautious consumer spending and a lingering property crisis that has eroded household wealth.

Fixed-asset investment for January-November rose 3.3% year-on-year, steady but underscoring infrastructure’s role in propping up activity.

Property investment plunged 10.4% in the first 11 months, with new home prices falling at the fastest pace in over a decade, exacerbating deflationary pressures.

New bank loans totaled 1.09 trillion yuan ($150 billion), missing estimates due to tepid household borrowing, while the urban unemployment rate edged up to 5.1%.

Inflation remained subdued, with the Consumer Price Index (CPI) up 0.7% year-on-year, far below the 3% target.

Despite these headwinds, the economy appears on track to achieve Beijing’s “around 5%” growth target for 2025, bolstered by a record $1.08 trillion trade surplus through November—up 8.7% year-on-year—and resilient exports, which surged 12.4% in November amid front-loading ahead of potential tariffs.

Q3 GDP came in at 4.6%, with full-year projections from institutions like the World Bank and IMF revised upward to 4.8-5.0%, citing easing U.S.-China trade tensions following a November interim agreement suspending certain duties.

The PBOC’s “cross-cyclical” adjustments—focusing on long-term stability—and banks’ record-low net interest margins (around 1.5%) afford policymakers flexibility to delay broad easing, prioritizing targeted measures like the September 50-basis-point reserve requirement ratio (RRR) cut and a November reduction in the medium-term lending facility (MLF) rate to 2.0%.

The announcement echoed signals from the annual Central Economic Work Conference (CEWC) held December 8-10, where top leaders, including President Xi Jinping, pledged a shift to a “moderately loose” monetary policy for 2026—marking the first such designation since 2010—and a “more proactive” fiscal stance to boost consumption, investment, and innovation.

The conference outlined nine key priorities: stimulating domestic demand through wage hikes and social security enhancements; advancing technological self-reliance in sectors like AI and quantum computing; deepening reforms in state-owned enterprises; stabilizing the property market via affordable housing initiatives; and managing risks in local government debt, estimated at $13 trillion.

Officials hailed 2025’s “remarkable” resilience amid external shocks but acknowledged challenges like weak consumption and overcapacity, committing to a 5% GDP target for 2026 while emphasizing “high-quality development.”

Analysts broadly interpret the hold as a sign of strategic patience rather than complacency. Barclays economists highlighted the CEWC’s call for “flexible and efficient” use of tools like RRR and interest rates, forecasting a 10-basis-point policy rate cut and 50bp RRR reduction in Q1 2026 to facilitate bond issuance.

Nomura anticipates a similar easing in Q2 2026, emphasizing fiscal ramps to arrest slowdowns.

Goldman Sachs and JPMorgan echo this, projecting cumulative 20-30bp LPR cuts in 2026 if property drags persist, while Pantheon Macroeconomics notes reduced trade risks post-U.S. deal could ease external pressures.

Zichun Huang of Capital Economics attributed November’s weakness to fiscal pullbacks, urging bolder reforms.

Market responses were subdued, reflecting pre-priced expectations. The Shanghai Composite Index rose 0.36% to close at 3,890.45 points, with gains in consumer and tech stocks offsetting property declines.

The onshore yuan held steady around 7.12 per U.S. dollar, supported by PBOC midpoint guidance, while 10-year government bond yields dipped slightly to 1.95%.

As China transitions into 2026, the PBOC’s hold buys time for fiscal tools, potentially including a larger deficit and special bonds, to take center stage, but persistent deflation and external uncertainties could force earlier intervention. With global peers like the Federal Reserve pausing hikes, Beijing’s calibrated approach aims to foster sustainable growth without reigniting debt risks, setting the stage for a pivotal year ahead.

China’s leading offshore oil producer, CNOOC Ltd, has brought a new offshore oil development into production in the South China Sea, adding incremental supply as Beijing steps up efforts to strengthen domestic crude output and reduce reliance on imports.

The company said on Monday that the Xijiang Oilfields 24 Block Development Project, located in the shallow waters of the Pearl River Mouth Basin, has commenced production. At peak levels, the field is expected to produce about 18,000 barrels of light crude oil equivalent per day by 2026.

CNOOC said the project was developed by tying into existing infrastructure at the neighboring Huixi Oilfields, with the installation of a new unmanned wellhead platform. The development plan includes 10 development wells, which will feed into nearby processing facilities. The company holds a 100% interest in the project and is its operator.

The Pearl River Mouth Basin is one of China’s most established offshore producing areas, and projects like Xijiang 24 illustrate how CNOOC is squeezing additional output from mature basins through smaller, faster-to-market developments. By relying on adjacent infrastructure rather than building a standalone production hub, the company is reducing costs and shortening development timelines, an approach it has increasingly adopted across its offshore portfolio.

While the projected output from Xijiang 24 is modest by global standards, the project fits into a much larger strategic picture. China is the world’s largest crude oil importer, and its buying patterns have a major influence on global oil flows and pricing. Any sustained success in boosting domestic production would, over time, reshape demand dynamics in the international oil market.

Beijing has repeatedly called on state-owned oil companies to raise domestic output, citing energy security concerns amid geopolitical tensions and supply disruptions. Offshore developments in the South China Sea and Bohai Bay have therefore become central to this strategy, as onshore production growth has been harder to achieve.

If China were to make meaningful progress toward meeting a larger share of its crude needs locally, the implications would extend well beyond its borders. As one of the biggest buyers of crude oil globally, China has played a critical role in absorbing barrels from sanctioned producers, particularly Russia and Venezuela, at times when access to Western markets has been constrained by U.S. sanctions.

Since the tightening of sanctions on Moscow following the Ukraine war, China has emerged as one of Russia’s most important crude customers, alongside India. Similarly, Chinese refiners have been a key outlet for Venezuelan oil, providing Caracas with a vital export channel after U.S. measures sharply restricted its ability to sell crude openly on global markets.

A sustained reduction in China’s import demand, driven by higher domestic output, would therefore pose a structural risk to these suppliers. Russia and Venezuela, already operating with limited market access, could face greater competition to place their crude, potentially at steeper discounts, if China’s appetite for imported barrels eases.

For now, China remains heavily dependent on imports, and projects like Xijiang 24 will not materially alter that balance on their own. However, taken together with dozens of similar offshore developments, they signal a long-term policy direction. Incremental gains across multiple projects could gradually chip away at import dependence, particularly for light and medium grades that are well suited to China’s refining system.

CNOOC’s focus on unmanned platforms, digital monitoring, and infrastructure-led developments also suggests that future offshore projects could be brought on stream more quickly and with lower operating costs, improving the economics of domestic production.

Gold and silver prices surged to fresh record highs on Monday, extending a rally that has gathered remarkable momentum this year as investors retreat from risk assets and brace for mounting economic and political uncertainty.

Gold futures for February delivery settled 1.9% higher at $4,469.40 per ounce after touching an intraday record of $4,477.70. Spot gold climbed nearly 2% to $4,440.26 per ounce. The precious metal is now up close to 70% since the start of the year, marking one of its strongest annual performances on record.

Silver followed gold’s lead, also breaking into uncharted territory. Futures prices hit $68.96 per ounce, while spot silver traded at $68.98. Silver’s rally has been even more dramatic, with prices up about 128% year-to-date, underscoring the extent to which investors are crowding into precious metals as alternative stores of value.

The surge reflects a broader shift in global markets. Risk assets have struggled to maintain momentum, even after the U.S. Federal Reserve delivered its widely anticipated interest rate cut on December 10, and a brief rebound lifted AI-related stocks in the previous session. Instead of chasing equities, many investors appear to be repositioning portfolios defensively ahead of what they expect to be a more volatile macroeconomic environment in 2026.

Gold’s traditional role as a safe-haven asset has come back into sharp focus amid concerns about slowing growth, geopolitical risks, and, increasingly, the sustainability of government finances. According to Matthew McLennan, head of the global value team at First Eagle Investments, swelling fiscal deficits across major economies have revived gold’s appeal as a monetary hedge.

“Due to outsized fiscal deficits in the U.S., U.K., Europe, and increasingly Japan and China, the monetary value of gold has arguably reemerged,” McLennan said in an interview on CNBC’s The Exchange on December 17.

He added that gold had moved from being undervalued relative to nominal assets used as hedges to a level he considers more rational, pulling other precious metals higher in the process.

“The value of gold as a monetary potential hedge has reemerged,” he said. “Gold went from being depressed relative to the nominal assets that you would want to use as a potential hedge against it, to more rationally valued. And I think the other precious metal complexes followed it higher with some leverage.”

Silver’s sharper gains reflect both its historical tendency to amplify gold’s moves and its growing role in industrial applications, including renewable energy and electronics. That dual demand profile has made silver particularly sensitive to both inflation expectations and long-term structural trends, further fueling investor interest.

The rally has also lifted mining stocks. In premarket trading in the United States, shares of gold and silver miners edged higher, with the iShares MSCI Global Gold Miners ETF rising nearly 2.7%, as investors bet that sustained high prices will boost cash flows and balance sheets across the sector.

Beyond inflation and growth concerns, attention is turning to U.S. monetary leadership. Investors are closely watching the race to nominate the next chair of the Federal Reserve, amid questions about the institution’s independence following repeated public pressure from President Donald Trump on current chair Jerome Powell. Markets are increasingly sensitive to any signal that political considerations could influence future monetary policy.

“What we’re quite focused on here is the long-term fiscal credibility of the United States,” McLennan said. “Because I think that is the condition precept for having an independent Fed and for having a rational chair.”

Labour market dynamics are another key variable. McLennan said wage inflation could shape the outlook for both interest rates and precious metals in the months ahead, particularly if job openings continue to rise alongside corporate earnings. Such a combination could complicate the Fed’s efforts to strike a balance between supporting growth and keeping inflation in check.

For now, gold and silver appear to be benefiting from a convergence of anxieties: ballooning deficits, uncertain monetary leadership, and unease about the durability of the global recovery. With prices already at historic highs and investor sentiment tilting defensive, precious metals are once again asserting themselves as a central pillar of portfolio protection rather than a peripheral hedge.