China's central bank left its benchmark loan prime rates unchanged on Monday, maintaining its cautious stance despite mounting evidence of economic weakness and a prolonged real estate crisis. The People's Bank of China held the 1-year loan prime rate at 3% and the 5-year rate at 3.5% for a seventh consecutive meeting, aligning with market expectations.

The decision comes as recent data for November painted a gloomy picture: retail sales growth slowed sharply to 1.3% year-over-year, missing forecasts, and industrial output expanded at its weakest pace since August 2024. The property sector continues to drag, with fixed-asset investment declining 2.6% in the first eleven months of the year and new home prices falling in major cities.

Eswar Prasad, an economics professor at Cornell University, noted that while "some stimulus will help," monetary policy alone may have limited impact given the profound weakness in the private sector. "They're going to have to turn on the stimulus taps... but that really needs to be packaged with some broader reforms," he told CNBC.

Policymakers have signaled a shift toward fiscal measures, with plans to issue ultra-long-term special government bonds in 2026 to fund infrastructure projects. Authorities have also pledged to boost consumption to counter deflationary pressures.

A potential bright spot is the recent interim trade deal with the United States, which suspended prohibitive tariffs and could support China's exports, helping the economy meet its "around 5%" growth target for 2025.

Financial markets showed muted reaction. The mainland's CSI 300 index edged up 0.43%, while the onshore and offshore yuan traded relatively stable against the U.S. dollar. The PBOC's inaction underscores the delicate balancing act it faces: providing support to a faltering economy while avoiding measures that could exacerbate structural imbalances or currency pressures.