China held its loan prime rates unchanged despite weaker credit demand, while expanding fiscal interest subsidies for credit-card instalments and small-business working-capital loans. The combination points to greater use of targeted fiscal-credit measures as narrow bank margins limit room for broad rate reductions.

Commercial-bank margins rose for the first time in over four years as deposit costs fell. Ping An Bank returned to revenue and profit growth following its retail-risk retrenchment. In technology, DeepSeek raised V4 API prices, while Alibaba released a smaller Qwen model for local deployment on consumer-grade hardware.

Read more on the week’s key developments

1. China holds LPRs as narrow bank margins limit room for easing

China kept its loan prime rates (LPRs) unchanged for a 15th consecutive month on 20 August. The one-year loan prime rate remained at 3.00%, while the five-year rate, used as a reference for mortgages, stayed at 3.50%. The fixing followed the People’s Bank of China’s (PBOC) decision to maintain its seven-day reverse repo rate and came after net new RMB bank lending fell by a record RMB340 billion ($50.4 billion) in July.

The decision indicates that policymakers are not responding to weaker credit demand with an immediate broad rate reduction. Commercial-bank margins remain near historical lows, limiting banks’ capacity to lower lending rates without further reductions in funding costs. The unchanged LPR, together with expanded fiscal interest subsidies announced this week, points to greater use of fiscal and targeted measures while authorities assess the effect of earlier monetary easing.

2. PBOC adds eight new digital RMB operating institutions, bringing total to 30

On 17 August, the PBOC added eight new bank‑type digital RMB operators – Ping An Bank, Hengfeng Bank, Bohai Bank, Bank of Shanghai, Bank of Hangzhou, Huishang Bank, Bank of Changsha and Bank of Beibu Gulf – bringing the total to 30. This second expansion of 2026 follows April’s addition of 12 institutions, extending the network from major state‑owned banks to joint‑stock and city commercial banks.

The increase in operators broadens the digital RMB’s institutional distribution network and gives users access through more banking channels. City commercial banks may help extend services in their regional markets. For operators, direct participation raises requirements for technology, risk management and operational capacity. However, the expansion does not by itself establish greater adoption, which will depend on wallet usage, transaction volumes and integration into payment services.

3. PBOC and SAFE roll out cross-border fund-management rules nationwide

On 14 August, the PBOC and the State Administration of Foreign Exchange (SAFE) jointly issued rules to extend nationwide the centralised management of cross-border funds in RMB and foreign currencies for multinational companies, effective 14 September 2026. Previously piloted in Beijing and Guangdong, including Shenzhen, the framework streamlines procedures, lowers participation thresholds and strengthens macro-prudential oversight.

The nationwide rollout can improve the efficiency of cross-border fund operations. Enterprises may benefit from lower costs, greater flexibility and reduced compliance burdens, while banks may gain opportunities to expand corporate cash-management services. The reform advances financial opening while retaining operating requirements and ongoing supervision to manage cross-border capital-flow risks.

4. Commercial banks’ NIM edges up to 1.41% in first quarterly increase in over four years

According to NFRA data, commercial banks’ NIM rose one basis point to 1.41% at end-Q2, its first quarter-on-quarter increase since Q1 2022. Large state-owned, city commercial, private and rural commercial banks recorded improvements, while joint-stock banks were flat and foreign banks declined. The industry’s NIM had fallen from 1.97% in Q1 2022 to a record low of 1.40% in Q1 2026.

The marginal increase suggests that pressure on bank margins may be stabilising, supported mainly by lower deposit costs as higher-rate time deposits are repriced. However, at 1.41%, NIM remains historically low and a sustained recovery is not assured, particularly while loan yields remain under pressure. Banks therefore continue to face pressure to diversify income and reduce their reliance on interest spreads.

5. China expands interest subsidies for consumer, credit-card and small-business loans

In a notice dated 17 August, the Ministry of Finance, PBOC and NFRA expanded China’s fiscal interest-subsidy programme, with the changes applying from 1 August. The measures extend subsidies to eligible working-capital loans for small and medium-sized private enterprises and to new credit-card instalment transactions. They also broaden the range of participating banks and raise subsidy limits for enterprise, service-sector and personal consumption loans.

The policy strengthens fiscal-financial coordination to reduce borrowing costs and support consumption and investment. Fiscal interest subsidies can help leverage bank lending by using public funds to lower effective rates for eligible borrowers. Consumers and businesses may benefit from lower financing costs, while banks gain a broader pool of subsidised lending opportunities. However, its overall effect will depend on underlying credit demand.

6. DeepSeek raises V4 API prices by up to 1,100% and restores time-based pricing

On 17 August, DeepSeek introduced new peak and off-peak pricing for its V4-Pro and V4-Flash APIs. During peak hours of 09:00–12:00 and 14:00–18:00 Beijing time, prices for some V4-Pro usage rose by up to 1,100%, or 12 times the previous level. Off-peak rates are half the new peak rates but remain above their previous levels. DeepSeek said the structure was intended to allocate computing resources more efficiently.

The increases mark a shift in DeepSeek’s pricing strategy following earlier discounts, with the company charging a larger premium for its flagship model as V4-Pro moves into full commercial release. Time-based pricing may encourage developers to reschedule non-urgent workloads, while users requiring peak-hour access face substantially higher costs. However, it is too early to conclude that the move ends the AI price war or that competitors will follow.

7. China and Australia renew RMB220 billion currency swap for five years

On 19 August, the PBOC and Reserve Bank of Australia renewed their bilateral local-currency swap agreement, increasing its size from RMB200 billion ($29.7 billion) to RMB220 billion ($32.7 billion). The five-year agreement can be extended by mutual consent and activated by either central bank. It is intended to deepen financial cooperation, facilitate bilateral trade and investment and support financial-market stability.

The expansion increases the local-currency liquidity potentially available through the facility and could support greater use of RMB in bilateral transactions. It also provides continuity to a swap arrangement first established in 2012. However, the agreement does not itself demonstrate greater RMB settlement or reduced exchange-rate costs, which will depend on whether and how the facility is used.

8. China expands housing provident fund withdrawals and coverage

On 18 August, the State Council issued amendments to the Housing Provident Fund Management Regulations, effective 20 September. Key changes include removing the income threshold for rental withdrawals, adding home renovation and property-management fees to permitted uses, promoting digital and intelligent services, strengthening risk controls and allowing self-employed, part-time and other flexible workers to contribute voluntarily. The amendments also specify that deposit and lending rates are determined by the State Council and add policy financial bonds to the permitted investment scope.

The changes make the system more responsive to rental and continuing housing costs while extending potential access to flexible workers. Digitalisation and nationwide recognition of contribution records should simplify transfers and applications across regions. Adding policy financial bonds broadens fund-management centres’ investment options, although it does not guarantee higher returns. Local implementation rules will determine how widely flexible workers participate, while entrusted commercial banks may need to adjust their operating processes.

9. Ping An Bank restarts growth after retail-risk retrenchment

Ping An Bank returned to growth in the first half of 2026 after operating income and profit declined in 2025. Operating income rose 1.8% to RMB70.62 billion ($10.5 billion), while net profit increased 3.3% to RMB25.70 billion ($3.8 billion). Its net interest margin was unchanged year on year at 1.80%, ending a prolonged decline, as a 38-basis-point fall in its average deposit cost offset a 39-basis-point drop in loan yields. Wealth-management fee income rose 35.6%, led by higher fund and insurance distribution income.

At the results briefing, President Ji Guangheng said the bank would not pursue growth through simple balance-sheet expansion or by moving down the risk curve. Loan growth remained modest at 1.8% from end-2025, while the NPL ratio was unchanged at 1.05% and the NPL formation rate fell 49 basis points year on year. Growth is increasingly being supported by wealth management, lower funding costs and corporate lending in selected sectors following the earlier reduction of higher-risk retail credit. The bank expects renewed asset repricing and a slower benefit from deposit repricing to keep margins under pressure in the second half.

10. Alibaba releases Qwen3.8-27B for local deployment on consumer GPUs

On 14 August, Alibaba’s Qwen team released the weights for Qwen3.8-27B, a dense 27-billion-parameter multimodal model. Quantised versions can run on consumer graphics cards with 24GB of memory, including Nvidia’s RTX 4090, although performance and supported context length depend on the configuration. Alibaba also released the underlying Qwen3.8-2.4T-A95B model on which its commercial Qwen3.8-Max service is based.

The smaller model gives developers an option for deploying capable AI locally with lower infrastructure requirements than very large frontier models. This can support applications requiring greater control over data and deployment, although fine-tuning and production-scale use may still require more substantial computing resources. Qwen’s expanding model and derivative ecosystem indicates stronger developer interest, but downloads alone do not establish production use or commercial success.

What to watch

CIFS 2026 ninth China Financial Digital Intelligence Summit, Shanghai (26 August); interim results from China’s six major state-owned banks (29 August); official manufacturing and non-manufacturing PMIs for August (31 August)