On September 25, the Monetary Policy Committee of the People’s Bank of China (PBOC) held the third quarterly meeting of 2024 (its 106th meeting) in Beijing.
The meeting analyzed the economic and financial developments both at home and abroad. It was noted at the meeting that since the beginning of 2024, the PBOC has enhanced macro regulation, pursued a sound monetary policy that is flexible, moderate, precise, and effective, steadfastly adhered to an accommodative stance, strengthened counter-cyclical adjustments, and improved monetary policy framework. It has used a mix of policy tools, such as interest rates, the required reserve ratio (RRR), central bank lending, and purchasing and selling of government bonds to provide solid support for the real economy and effectively prevent financial risks, creating a favorable monetary and financial environment for economic recovery. It has achieved remarkable results in the loan prime rate (LPR) reform, and given full play to the role of the mechanism for market-oriented adjustments of deposit rates. The monetary policy transmission has become more efficient, and social financing costs have continued to decline. Supply and demand in the foreign exchange market have been basically in equilibrium, current account surplus has remained stable, and foreign exchange reserves have been adequate. The RMB exchange rate has moved in both directions with stable expectations and remained basically stable at an adaptive and equilibrium level.
It was noted at the meeting that uncertainties incurred by changes in external environment are on the rise as the momentum for world economic growth is lackluster, and inflation eases somewhat. Major economies are witnessing diverging economic performances, and are turning to cycle of rate cuts when it comes to monetary policy. China’s economy has maintained stability on the whole and made solid progress in high-quality development, but still faces challenges such as insufficient effective demand and weak social expectations. The PBOC will implement a sound monetary policy in a precise and effective manner, attach more importance to counter-cyclical adjustments, and give full play to the role of monetary policy instruments in adjusting both the aggregate and the structure. In addition, it will focus on expanding domestic demand and boosting confidence so as to promote continuous economic recovery.
It was held at the meeting that the regulation of monetary policies should be more intense and more targeted. The PBOC will keep liquidity adequate at a reasonable level, guide reasonable growth and balanced supply of credit, and ensure that the aggregate financing to the real economy (AFRE) and the money supply are in line with the economic growth and the expected price level, so as to keep prices at a reasonable level. The PBOC will improve the market-oriented interest rate formation and transmission mechanism, strengthen the guiding role of the central bank policy rates, unleash the benefits of the self-regulatory mechanism for the pricing of market rates and the mechanism for market-oriented adjustments of deposit rates, and steadily bring down the financing costs for businesses and the credit costs for residents. At the same time, the PBOC will include the purchasing and selling of government bonds into the monetary policy toolkit and pay attention to changes in long-term yields. It will smooth the transmission mechanism of the monetary policy to improve the efficiency of capital utilization. Moreover, it will enhance expectation guidance and strengthen the flexibility of exchange rates to keep the RMB exchange rate basically stable at an adaptive and equilibrium level. It will resolutely prevent the formation and self-reinforcement of one-sided and unanimous expectations, and guard against the risk of exchange rate overshooting.
It was noted at the meeting that the supply-side structural reform of the financial sector should be deepened to build the system and mechanism needed to provide effective financial support for the real economy. The PBOC will guide large-sized banks to play their leading role in providing financial services for the real economy, encourage small and medium-sized banks to focus on their main duties and major businesses, and support banks in capital replenishment. In doing so, the financial sector will work together to safeguard the steady development of the financial market. The PBOC will make great efforts in the areas of technology finance, green finance, inclusive finance, old-age finance, and digital finance, and continue to intensify support for major national strategies, key fields, and weak links, thus accelerating the development of new quality productive forces, and better satisfying reasonable demand for consumption and financing in a targeted manner. It will make good use of the existing structural monetary policy tools, and move ahead with the effective implementation of new facilities such as the swap facility for securities, fund and insurance companies, and central bank lending for share buybacks and holdings increase, which shall stabilize the capital market. It will further encourage the use of central bank lending for sci-tech innovation and technological transformation, and step up financial support for large-scale equipment renovation and trade-in of consumer goods. The PBOC will accelerate building a diversified and seamless financial service system that covers the entire life cycle of sci-tech-based enterprises, which will facilitate building China into a great power in science and technology, and achieving sci-tech self-reliance and self-strengthening at higher levels. Firmly implementing the “two unswervinglys”, the PBOC will provide better financial services for the development and growth of the private economy, while conquering the problems that restrain the small and medium-sized enterprises from getting financed. Based on in-depth knowledge of the changes in the relationship between supply and demand in the real estate market and responding to people’s aspiration for high-quality housing, it will work to ensure that the financial policies introduced will deliver results, support revitalizing the inventory of unused land, and lower the interest rate on existing home loans, thus facilitating the stable and healthy development of the real estate market. The PBOC will intensify the financial support for the housing supply system which features “market mechanism plus government subsidy”, and promote the establishment of a new development model of the real estate sector. It will put into effect the financial policies that aim to promote the healthy development of the platform economy. The PBOC will effectively advance the high-level two-way opening-up of the financial sector, and enhance the capacity for economic and financial oversight as well as risk management in an open economy.
It was stressed at the meeting that under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBOC will fully implement the guidelines of the 20th National Congress of the Communist Party of China (CPC), the Third Plenary Session of the 20th CPC Central Committee, the Central Economic Work Conference, and the Central Financial Work Conference, as well as the decisions and arrangements made by the CPC Central Committee and the State Council. United with all relevant parties to make joint efforts unremittingly, it will firmly uphold the utmost priority of high-quality development, steadfastly follow the Chinese path to modernization, and apply the new development philosophy fully, faithfully and comprehensively, to speed up the establishment of a new development paradigm. The PBOC will effectively combine the strategy of expanding domestic demand and deepening supply-side structural reform, strengthen coordination and cooperation among macro policies, and spare no efforts to put into practice the incremental policies, so as to substantially improve social expectations, rejuvenate the economy, and consolidate and fortify the upward trend of economic recovery.
The meeting was chaired by Pan Gongsheng, Governor of the PBOC and Chairman of the Monetary Policy Committee. Members of the Monetary Policy Committee, including Zhang Qingsong, Li Yunze, Wu Qing, Zhu Hexin, Wang Yiming, Huang Yiping, Huang Haizhou attended the meeting. Xu Shouben, Li Chunlin, Liao Min, Xuan Changneng, Kang Yi and Tian Guoli took a leave of absence for official businesses. Attendees also included officials from the PBOC Hebei Provincial Branch, Hubei Provincial Branch, Guangdong Provincial Branch, and Qinghai Provincial Branch.
