On March 18, the Monetary Policy Committee of the People’s Bank of China (PBOC) held the first quarterly meeting of 2025 (its 108th meeting).
It was noted at the meeting that since the beginning of this year, the PBOC has intensified macro adjustments, pursued an appropriately accommodative monetary policy, strengthened counter-cyclical adjustments, and used a mix of monetary policy tools, thus supporting the high-quality development of the real economy and creating a sound monetary and financial environment for sustained economic rebound. The PBOC has achieved remarkable results in the loan prime rate reform, and it has 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 financing costs for the real economy have remained at historically low levels. Supply and demand in the foreign exchange market have basically been 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 stabilizing expectations and remained basically stable at an adaptive and equilibrium level. The financial market has remained generally stable.
The meeting analyzed the economic and financial developments both domestically and internationally, and highlighted the increasing complexity and severity of the external environment, given the sluggish global economic growth, diverging economic performance among major economies, and rising uncertainties surrounding inflation trends and monetary policy adjustments. China’s economy has remained generally stable with steady progress, and has witnessed solid achievements in high-quality development, but it still faces challenges such as insufficient domestic demand and various potential risks. It was required to implement an appropriately accommodative monetary policy, strengthen the counter-cyclical adjustments, and leverage the role of monetary policy instruments in adjusting both the aggregate and the structure. In addition, coordination between monetary and fiscal policies should be enhanced to maintain stable economic growth and keep prices at a reasonable level.
The meeting discussed the main directions for the monetary policy in the next stage and recommended increasing the intensity of monetary policy adjustments. It suggested enhancing the foresight, precision, and effectiveness of monetary policy adjustments and implementing required reserve ratio and interest rate cuts at an appropriate time based on domestic and international economic and financial developments as well as financial market dynamics. The PBOC will keep liquidity adequate and guide financial institutions to increase the supply of money and credit, ensuring that the growth of aggregate financing to the real economy and the money supply is aligned with economic growth and the expected target level of prices. It will strengthen the guiding role of the central bank policy rates, improve the market-oriented mechanism for interest rate formation and transmission, leverage the self-regulatory pricing mechanism for market interest rates, and enhance the implementation and supervision of interest rate policies. The overall financing costs for the real economy will be reduced. The PBOC will observe and evaluate the operation of the bond market from a macro-prudential perspective, and pay attention to changes in long-term yields. It will smooth the transmission mechanism for the monetary policy to improve the efficiency of capital utilization and prevent the circulation of funds within the financial system. The PBOC will enhance the resilience of the foreign exchange market, stabilize market expectations, strengthen market management, resolutely correct pro-cyclical market behaviors, resolve market disorders, and guard against the risk of exchange rate overshooting, so as to keep the RMB exchange rate basically stable at an adaptive and equilibrium level.
The meeting discussed efforts to deepen the supply-side structural reform of the financial sector and emphasized the need to 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 stability of the financial market. It will make good use of the existing structural monetary policy tools, make significant 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. The PBOC will optimize the central bank lending policy for sci-tech innovation and technological transformation, explore and introduce new structural monetary policy tools, and focus on supporting investment and financing in the field of sci-tech innovation, thus stimulating consumption and stabilizing foreign trade. It will make good use of the two new tools: Securities, Funds, and Insurance companies Swap Facility, and Central Bank Lending Facility for Share Buybacks and Shareholding Increases, and explore regular institutional arrangements, aiming to maintain the stable development of the capital market. The PBOC will continue to provide better financial services for the development and growth of the private economy, fully leverage the coordination mechanism for facilitating financing for micro and small businesses, and further address bottlenecks and obstacles in financing for micro, small and medium-sized enterprises. It will strive to ensure that the financial policy measures that have been introduced will deliver results, step up efforts to revitalize existing commercial housing and stock land, assist in stabilizing the real estate market following a decline, improve the fundamental rules for real estate financing, and support the establishment of a new development model for the real estate sector. Work will be done to implement financial policy measures 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 third plenary session of the 20th Communist Party of China (CPC) Central Committee, the Central Economic Work Conference and the “two sessions”. According to the decisions and arrangements made by the CPC Central Committee and the State Council, the PBOC will firmly pursue high-quality development as a top priority, follow the Chinese path to modernization, apply the new development philosophy fully, faithfully and comprehensively, and speed up building a new development paradigm. It will pursue the strategy of expanding domestic demand while deepening supply-side structural reform, enhance macroeconomic policy coordination, effectively implement existing policies, and accelerate the implementation of incremental policies. It will ensure a good start, expand domestic demand, stabilize expectations, and stimulate vitality to promote sustained 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 Xu Shouben, Li Chunlin, Liao Min, Xuan Changneng, Wu Qing, Kang Yi, Zhu Hexin, Gu Shu, Wang Yiming, Huang Yiping and Huang Haizhou, attended the meeting. Li Yunze took a leave of absence for official business. Attendees also included officials from the PBOC Inner Mongolia Autonomous Region Branch, Fujian Provincial Branch, Henan Provincial Branch and Guizhou Provincial Branch.
