China’s central bank: Q1 monetary policy balanced and effective

People’s Bank of China headquarters in Beijing, China. /CFP

People’s Bank of China headquarters in Beijing, China. /CFP

The People’s Bank of China (PBOC) unveiled its assessment of China’s monetary policy execution for the first quarter on Saturday, spotlighting a balanced and effective strategy that has laid the groundwork for economic recovery across a favorable monetary and financial landscape.

Emphasizing the significance of maintaining sufficient liquidity, the report highlighted a substantial move at the year’s outset. A 0.5 percentage point reduction in the reserve requirement ratio, which facilitated the infusion of over 1 trillion yuan ($153.85 billion) in medium- to long-term liquidity, bolstering economic resilience.

Employing a multifaceted approach, a blend of open market operations, medium-term lending facilities, and re-lending and rediscounting tools ensured the liquidity’s adequacy, further reinforcing financial stability.

Efforts were also made to stabilize and lower financing costs. A targeted 0.25 percentage point drop in re-lending and re-discount interest rates for the rural sector and small businesses was implemented.

Furthermore, it continued to promote the market-oriented reform of deposit rates, and guided a 0.25 percentage point decrease in the over-five-year loan prime rate (LPR) in February.

Driving home its commitment to adaptability and inclusivity, the report heralded structural adjustments in credit. A 500 billion yuan facility for technological innovation and transformation was established, alongside relaxed criteria for inclusive loans to micro and small enterprises.

The PBOC pledges to uphold the prudence of its monetary policy while intensifying support for the real economy. Continuing the momentum of interest rate marketization reforms remains a cornerstone, leveraging innovative mechanisms such as reforms to the loan prime rate and market-oriented adjustments of deposit rates, to further stabilize and reduce corporate and household financing expenses.