China’s Central Bank to Maintain Supportive Monetary Policy

China’s central bank governor, Pan Gongsheng, reaffirmed plans for a supportive monetary policy to bolster growth next year as the nation faces new challenges from a potential trade war with the United States during Donald Trump’s second presidential term. Speaking at a financial forum in Beijing on Monday, Pan emphasized that the People’s Bank of China (PBOC) will maintain an “accommodative monetary policy stance” throughout 2025 to address slowing economic conditions.

China’s Central Bank to Maintain Supportive Monetary Policy

The PBOC is also prepared to “step up counter-cyclical policy adjustments,” a term that typically refers to efforts to stimulate the economy during downturns. Pan highlighted that the central bank would use a variety of tools to ensure ample liquidity and lower borrowing costs for businesses and households. This policy stance will be crucial as the global economic environment remains uncertain, particularly with the US president-elect’s pledge to impose steep tariffs on Chinese exports. This potential trade dispute could dampen China’s export-driven growth, a critical component of the economy since the pandemic.

Amid these economic pressures, the yuan dropped to its lowest level against the US dollar in nearly a year, reflecting concerns about China’s economic prospects. Despite these challenges, recent measures taken by the central bank and other government bodies, such as interest rate cuts and a reduction in the reserve requirement ratio (RRR), have provided some stability. Experts anticipate further cuts to the RRR in the coming months, possibly by the end of 2024.

At the forum, Pan also introduced changes to the M1 money supply statistics, which track the actual purchasing power within the economy. The revised metric will now include individual demand deposits and funds on popular digital payment platforms, such as Alipay and WeChat, offering a more comprehensive view of financial activity. This adjustment aims to address the slowing of M1 growth, which has contracted since early 2024, and better align China’s data with international standards.

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