Executive Summary
Since the beginning of 2025, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as its core, the Chinese economy has developed steadily on a positive trajectory, underpinned by macro policy coordination. In Q1, the Gross Domestic Product (GDP) grew 5.4 percent year on year, with a sustained uplift in social confidence as well as solid progress in high-quality development, marking a robust beginning for the year. 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 an appropriately accommodative monetary policy and by strengthening counter-cyclical adjustments, the PBOC has created a favorable monetary and financial environment for sustained economic recovery and development.
First, money and credit maintained reasonable growth. The PBOC kept liquidity adequate by using a mix of tools, including the required reserve ratio (RRR), open market operations (OMOs), medium-term lending facility (MLF) operations, and central bank lending and discounts. Financial institutions were encouraged to fully satisfy the effective credit needs of the real economy and to enhance the efficiency of fund utilization so as to improve the quality and efficiency of financial services for the real economy. Second, overall social financing costs were guided to move downward. The PBOC continued to improve the market-oriented interest rate adjustment framework and lowered the policy rate and the rates on structural monetary policy instruments, while strengthening the implementation of the interest rate policy, to bring down both deposit and loan rates. Third, the credit structure was improved. The PBOC improved central bank lending for sci-tech innovation and technological transformation, and it made good use of the two facilities supporting the capital market. While ensuring effective use of the structural monetary policy instruments that are still in effect, it also launched new policy instruments in a bid to continue its efforts to develop sci-tech finance, green finance, inclusive finance, old-age finance, and digital finance. Fourth, the RMB 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 implemented a mix of policies to keep expectations stable, and the RMB exchange rate remained basically stable despite the complex circumstances. Fifth, risk prevention and resolution were strengthened. Risk resolution in key areas was steadily promoted and the system of financial risk monitoring, assessments, and early warnings was continuously improved.
The counter-cyclical adjustments of monetary policy achieved significant results. Financial aggregates witnessed steady growth. At end-March, outstanding aggregate financing to the real economy (AFRE) and broad money supply (M2) recorded year-on-year growth of 8.4 percent and 7.0 percent, respectively. Outstanding RMB-denominated loans registered RMB265.4 trillion. Social financing costs were at a historic low. In March, the rate on new corporate loans and on new personal housing loans dropped by about 50 basis points and 60 basis points year on year, respectively. The credit structure continued to improve. At end-March, loans extended to specialized, sophisticated, distinctive, and innovative small- and medium-sized enterprises (SMEs) and loans to inclusive micro and small businesses (MSBs) registered a year-on-year increase of 15.1 percent and 12.2 percent, respectively, outpacing, as before, the overall loan growth. The RMB exchange rate remained basically stable at an adaptive and equilibrium level. At end-March, the central parity of the RMB against the U.S. dollar registered 7.1782, roughly on a par with that at end-2024.
Currently, the impact of external shocks is growing, with insufficient momentum for global economic growth, a rise in trade protectionism, and persistent geopolitical conflicts. The foundation for China’s sustained economic recovery and development still needs to be further consolidated. However, it should also be noted that China has numerous advantages, including a super-large market, a comprehensive industrial system, and abundant talent resources. The fundamental trend of long-term economic growth remains unchanged. We must strengthen confidence in development and address external uncertainties with the certainty of high-quality development. Looking ahead, 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 Third Plenary Session of the 20th CPC Central Committee, the Central Economic Work Conference, and the Two Sessions. 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 reforms and high-standard opening-up, and it will continue its efforts to promote high-quality financial development and to build China into a financial powerhouse. It will quicken the pace of improving 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 considerations, between growth stability and risk prevention, between internal and external equilibria, and between supporting the real economy and maintaining the soundness of the banking system. 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. Every effort will be made to consolidate the foundation for economic development and social stability.
The PBOC will implement an appropriately accommodative monetary policy. It will flexibly adjust the intensity and pace of policy implementation 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 the increase in the Consumer Price Index (CPI). 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, further improve the interest rate adjustment framework, strengthen the implementation and oversight of interest rate policies, reduce the banks’ liability costs, and promote a decline in overall financing costs. It will give play to the role of monetary policy tools in adjusting both the aggregate and the structure, and it will implement policies in a targeted, appropriate, and flexible manner. Financial institutions will be guided to enhance their support for sci-tech finance, green finance, inclusive financing for SMEs, consumption expansion, and foreign trade stabilization. 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, to enhance the resilience of the foreign exchange market and stabilize market expectations. It will take resolute steps to correct pro-cyclical market behavior, address any conduct that disrupts market order, and guard against the risks of exchange rate overshooting so as to keep the RMB exchange rate basically stable at an adaptive and equilibrium level. While exploring to expand its functions in macro-prudential regulation and financial stability, the PBOC will safeguard financial market stability and firmly defend the bottom line whereby no systemic financial risks will occur.
