China held its benchmark lending rate steady for the third straight month at its July fixing on Monday, meeting market expectations, as the world's second-largest economy is leading in recovering from the COVID-19 pandemic.

Both the one-year and five-year loan prime rates (LPR) remained unchanged from last month, at 3.85 percent and 4.65 percent, respectively, according to a People's Bank of China (PBOC) statement.

The LPR is the rate commercial banks charge their most creditworthy customers. It is set by 18 banks on the 20th of every month.

The one-year LPR mainly influences most new and outstanding business loans, while the five-year LPR primarily affects mortgage loans.

In August 2019, China's central bank revamped the system to let commercial banks refer to the LPR to price new loans. Prior to this, the PBOC would set the interest rate that commercial banks can charge their customers for their loans.

Four days ago, the PBOC set the interest rate on medium-term lending facility, a tool to help commercial and policy banks maintain liquidity and a guide for the LPR. It was unchanged at 2.95 percent for three straight months, signaling the LPR will not be lowered.

(People's Bank of China, Beijing, China. /Reuters)