Executive Summary
The year 2024 marks a crucial year for achieving the objectives and tasks laid down in the 14th Five-Year Plan. In the face of a complex and severe environment of increasing external pressures and internal difficulties, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as its core, China intensified macro regulation and launched a range of policy packages to solidly promote high-quality development. The main goals and tasks of economic and social development for the entire year have been achieved. GDP grew 5 percent year on year, employment and prices were generally stable, social expectations were effectively boosted, and new driving forces and advantages grew steadily. Following the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the People’s Bank of China (PBOC) earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council. By pursuing a sound monetary policy in a flexible, moderate, precise, and effective manner, and by strengthening counter-cyclical adjustments, the PBOC supported the recovery and development of the real economy and the stable functioning of the financial market.
First, money and credit maintained reasonable growth. In 2024, the PBOC cut the required reserve ratio (RRR) on two occasions by a total of one percentage point, thus releasing over RMB2 trillion of long-term liquidity. In addition, it used a mix of tools, including open market operations (OMOs), medium-term lending facility (MLF) operations, and central bank lending and discounts, and it conducted government bond transactions, to keep liquidity adequate at a reasonable level. It encouraged a balanced supply of credit, and prevented and corrected idle funds to improve the quality and efficiency of financial services for the real economy. Second, overall social financing costs remained stable with a downward trend. The PBOC continued to improve the monetary policy framework, clarified central bank policy rate, and improved the loan prime rate (LPR) formation mechanism. In 2024, it cut the policy rate on two occasions by a total of 0.3 percentage points, guiding a decline in the one-year and the over-five-year LPR by a total of 0.35 percentage points and 0.6 percentage points, respectively. The solid implementation of the interest rate policy helped bring down both deposit and loan rates. Third, the credit structure was improved. The PBOC launched RMB500 billion of central bank lending for sci-tech innovation and technological transformation, expanded the list of financial institutions eligible for the Carbon Emission Reduction Facility (CERF), and continued its efforts to develop sci-tech finance, green finance, inclusive finance, old-age finance, and digital finance. It launched RMB300 billion of central bank lending for government-subsidized housing, removed the policy floor on mortgage rates, and further lowered interest rates on existing housing loans, thereby supporting the steady and sound development of the real estate market from both supply and demand sides. The PBOC also launched the Securities, Funds, and Insurance Companies Swap Facility (SFISF) as well as central bank lending for share buybacks and shareholding increases, with an initial quota of RMB500 billion and RMB300 billion, respectively, in a bid to boost capital market expectations. Fourth, the exchange rate remained basically stable. Upholding the decisive role of the market in the formation of the exchange rate, the PBOC gave play to the role of the exchange rate in adjusting the macro economy and the balance of payments. It strengthened expectation guidance and prevented risks of exchange rate overshooting so as to keep the RMB exchange rate basically stable against the background of a complex environment. Fifth, risk prevention and resolution were strengthened. The PBOC improved macro-prudential management of real estate finance, and efforts to resolve the debt risks of local government financing vehicles with financial support witnessed significant progress. Risk resolution of key institutions and regions was steadily promoted and the system of financial risk monitoring, assessment, and early warning was continuously improved.
Overall, the monetary policy stance was accommodative throughout 2024, providing strong support for economic recovery and development. Financial aggregates witnessed reasonable growth. At end-2024, outstanding aggregate financing to the real economy (AFRE) and broad money supply (M2) recorded year-on-year growth of 8.0 percent and 7.3 percent, respectively. Outstanding RMB-denominated loans registered RMB255.7 trillion. Loan rates witnessed an obvious decline. In December, the rate on new corporate loans and on new personal housing loans dropped by about 40 basis points and 90 basis points year on year, respectively. The credit structure continued to improve. At end-2024, loans extended to specialized, sophisticated, distinctive, and innovative enterprises and inclusive micro and small business (MSB) loans registered a year-on-year increase of 13 percent and 14.6 percent, respectively, outpacing, as before, the overall loan growth. The RMB exchange rate appreciated slightly against a basket of currencies. By end-2024, the China Foreign Exchange Trade System (CFETS) RMB Index had risen by 4.2 percent from the end of 2023.
Currently, the adverse effects brought about by the changes in the external environment have deepened and domestic difficulties and challenges remain, such as insufficient demand as well as many hidden risks. However, as the Chinese economy has a stable foundation, multiple strengths, strong resilience, and a great potential, the supporting conditions and fundamental trends for long-term sound economic development have not changed. During the next stage, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBOC will fully implement the guiding principles of the 20th CPC National Congress, the Second and Third Plenary Sessions of the 20th CPC Central Committee, and the Central Economic Work Conference. It will adhere to the general principle of seeking progress while maintaining stability and apply the new development philosophy fully and faithfully on all fronts. Firmly following the path of financial development with Chinese characteristics, the PBOC will further deepen financial reform and high-standard opening-up, continue its efforts to promote high-quality financial development and build China into a financial powerhouse. It will fasten the pace of making improvements to the central banking system and further optimize the monetary policy framework. The PBOC will work to strike a balance between short-term and long-term concerns, between growth stability and risk prevention, and between the internal and external equilibria. In addition, macro regulation will be more forward-looking, targeted, and effective, and macro policies will be better coordinated, in a bid to help expand domestic demand, stabilize expectations, and stimulate vitality, as well as to promote steady economic growth.
The PBOC will implement an appropriately accommodative monetary policy. Using a mix of monetary policy tools, it will adjust and improve the intensity and pace of policy in light of the economic and financial situations both at home and abroad as well as the performance of the financial market, in a bid to keep liquidity adequate and keep aggregate financing and money supply in step with the projected economic growth and CPI increase. Promoting a reasonable price recovery will be an important consideration for the implementation of monetary policies so as to keep prices at a reasonable level. The PBOC will smooth the transmission mechanism of monetary policy, better handle the relations between stock and increment, focus on revitalizing existing financial resources, and improve the efficiency of capital utilization. It will strengthen the guiding role of central bank policy rates and improve the market-based interest rate formation and transmission mechanism. Leveraging the self-regulatory mechanism for market interest rate pricing, it will strengthen the implementation of interest rate policies and boost the capacity of banks for independent and rational pricing so as to promote a reduction in financing costs for enterprises and credit costs for residents. The PBOC will give play to the role of monetary policy tools in adjusting both the aggregate and the structure, implement policies in a targeted, appropriate, and flexible manner, and optimize the tool system. While continuing its efforts to develop sci-tech finance, green finance, inclusive finance, old-age finance, and digital finance, it will intensify financial support for sci-tech innovation and the boosting of consumption. Pursuing a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies, the PBOC will let the market play a decisive role in the formation of the exchange rate, in a bid to enhance the resilience of the foreign exchange market, stabilize market expectations, and strengthen market regulation. It will take resolute steps to correct pro-cyclical market behavior, address any conduct that disrupts market order, 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 PBOC will make exploration to expand its function in macro-prudential regulation and financial stability. It will firmly defend the bottom line whereby no systemic financial risks will occur.
