According to Deputy Governor Lu Lei, China’s Central Bank will maintain its accommodative monetary policy to support the country’s high-quality economic development. In a press conference, Lu outlined the central bank’s plan to use various monetary policy tools to ensure sufficient liquidity in the financial system, promote stable and sustainable loan growth, and align the scale of social financing and money supply with economic development and price level targets.
The PBOC’s strategy also includes leveraging recently reduced policy interest rates and loan prime rates to encourage a steady decrease in financing and credit costs for corporations and households. By doing so, the central bank aims to improve the efficient allocation of funds and enhance financial services for key strategies, priority areas, and vulnerable sectors.
China’s Central Bank to Maintain Accommodative Monetary Policy
In addition, Zou Lan, another PBOC official, revealed that the central bank is expanding its monetary policy toolkit. A notable new development is the incorporation of government bond operations. This approach is to serve as a channel for issuing base currency and as a tool for managing liquidity. The PBOC seeks to achieve more scientific and precise liquidity management across various time horizons by integrating government bond transactions with other monetary instruments.
In August, the PBOC conducted open market operations involving government bonds, resulting in a net purchase of bonds worth 100 billion yuan (approximately 14.09 billion U.S. dollars). When questioned about the potential for further cuts to interest rates and the reserve requirement ratio, Zou indicated that the effects of earlier reserve requirement ratio reductions are still unfolding. He noted that future adjustments will be based on economic trends and conditions.
The PBOC’s continued focus on accommodative policy reflects its commitment to navigating the current economic landscape and supporting sustainable growth.
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