The Central Bank's First Quarter China Monetary Policy Implementation Report: Implement a Moderately Easy Monetary Policy

The Zhitong Finance App learned that on May 9, the central bank released China's monetary policy implementation report for the first quarter of 2025. In the next stage, a moderately loose monetary policy will be implemented. According to the economic and financial situation at home and abroad and the operation of financial markets, we can flexibly grasp the intensity and pace of policy implementation, maintain abundant liquidity, and match the scale of social financing and the growth in money supply with the expected goals of economic growth and overall price levels. Promoting a reasonable recovery in prices is an important consideration in grasping monetary policy to keep prices at a reasonable level. Unblock the transmission mechanism of monetary policy, further improve the interest rate regulation framework, continue to strengthen the implementation and supervision of interest rate policies, reduce bank debt costs, and promote the reduction of comprehensive social financing costs.

Give full play to the dual functions of monetary policy instruments and structure, insist on focusing on key points, reasonable moderation, progress and retreat, and guide financial institutions to step up their support for technology finance, green finance, inclusiveness, expansion of consumption, and stabilization of foreign trade. Adhere to a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, adhere to the decisive role of the market in exchange rate formation, enhance the resilience of the foreign exchange market, stabilize market expectations, resolutely correct market procyclical behavior, resolutely deal with acts disrupting market order, resolutely prevent the risk of exchange rate overadjustment, and maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level. Explore and expand the central bank's macroprudential and financial stability functions, maintain financial market stability, and firmly adhere to the bottom line that systemic financial risks do not occur.

The full text is as follows:

China Monetary Policy Implementation Report for the First Quarter of 2025

Since this year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at the core, various macroeconomic policies have made concerted efforts, and the economy has shown a positive trend. The gross domestic product (GDP) increased 5.4% year on year in the first quarter. Social confidence continued to be boosted, high-quality development progressed steadily, and the national economy got off to a good start. The People's Bank of China adheres to Xi Jinping's ideology of socialism with Chinese characteristics in the new era, earnestly implements the decisions and arrangements of the Party Central Committee and the State Council, implements a moderately loose monetary policy, strengthens countercyclical adjustment, and creates an appropriate monetary and financial environment for the economy to continue to improve.

The first is to maintain a reasonable growth in monetary credit. Comprehensive use of tools such as deposit reserves, open market operations, medium-term loan facilitation, and reloan and rediscount to maintain abundant liquidity. Guide financial institutions to fully meet the real economy's effective credit needs, improve the efficiency of the use of funds, and improve the quality and efficiency of services to the real economy. The second is to promote a reduction in the cost of comprehensive social financing. Improve the market-based interest rate regulation framework, lower policy interest rates and interest rates on structured monetary policy instruments, strengthen the implementation of interest rate policies, and drive interest rates on deposits and loans downward. The third is to guide credit restructuring and optimization. Promote the optimization of scientific and technological innovation and technological transformation and refinancing, make good use of the two capital market support tools, implement various existing structural monetary policy tools, create new policy tools, and continue to do a good job in the “five major articles” of finance. Fourth, keep the exchange rate basically stable. Insist that the market plays a decisive role in the formation of exchange rates, give full play to the macroeconomic and balance of payments adjustment function of the exchange rate, adopt comprehensive measures to keep expectations stable, and maintain basic stability in the RMB exchange rate under complex circumstances. Fifth, strengthen risk prevention and mitigation. Resolve financial risks in key areas in a steady and orderly manner, and continuously improve financial risk monitoring, evaluation and early warning systems.

The effect of countercyclical adjustment of monetary policy is quite obvious. Total financial volume grew steadily. At the end of March, large-scale social financing stocks and broad currency M2 increased 8.4% and 7.0% year-on-year respectively, and the RMB loan balance was 265.4 trillion yuan. The cost of social financing is at a historically low level. Interest rates on newly issued corporate loans and personal housing loans in March fell by about 50 and 60 basis points, respectively, over the same period last year. The credit structure was continuously optimized. At the end of March, loans for specialized and new SMEs and inclusive small and micro loans increased 15.1% and 12.2%, respectively, over the same period last year, and continued to be higher than the overall loan growth rate. The RMB exchange rate remained basically stable at a reasonable equilibrium level. At the end of March, the central price of the RMB exchange rate against the US dollar was 7.1,782 yuan, which was basically the same as at the end of the previous year.

Currently, the impact of external shocks is increasing, the momentum for world economic growth is insufficient, trade protectionism is on the rise, and geopolitical conflicts persist. The foundation for China's continued economic recovery and improvement needs to be further stabilized. It should also be noted that China has many advantages, such as a hyperscale market, a complete industrial system, and abundant human resources. The basic trend of long-term economic improvement has not changed. We must have firm confidence in development and deal with the uncertainty of changes in the external environment with the certainty of high-quality development. In the next stage, the People's Bank of China will adhere to Xi Jinping's ideology of socialism with Chinese characteristics in the new era, fully implement the spirit of the Third Plenary Session of the 20th CPC Central Committee, the Central Economic Work Conference and the National Two Conferences, adhere to the general tone of steady progress, fully, accurately and comprehensively implement the new development concept, unswervingly follow the path of financial development with Chinese characteristics, further deepen financial reform and high-level opening-up to the outside world, and continue to promote high-quality financial development and the construction of a financial power. Balance the short term and long term, steady growth and risk prevention, internal balance and external balance, support the relationship between supporting the real economy and maintaining the banking system's own health, improve the forward-looking, pertinent and effective macroeconomic control, enhance coordination and coordination of macroeconomic policies, expand domestic demand, stabilize expectations, stimulate vitality, and make every effort to consolidate the fundamentals of economic development and social stability.

Implement a moderately loose monetary policy. According to the economic and financial situation at home and abroad and the operation of financial markets, we can flexibly grasp the intensity and pace of policy implementation, maintain abundant liquidity, and match the scale of social financing and the growth in money supply with the expected goals of economic growth and overall price levels. Promoting a reasonable recovery in prices is an important consideration in grasping monetary policy to keep prices at a reasonable level. Unblock the transmission mechanism of monetary policy, further improve the interest rate regulation framework, continue to strengthen the implementation and supervision of interest rate policies, reduce bank debt costs, and promote the reduction of comprehensive social financing costs. Give full play to the dual functions of monetary policy instruments and structure, insist on focusing on key points, reasonable moderation, progress and retreat, and guide financial institutions to step up their support for technology finance, green finance, inclusiveness, expansion of consumption, and stabilization of foreign trade. Adhere to a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, adhere to the decisive role of the market in exchange rate formation, enhance the resilience of the foreign exchange market, stabilize market expectations, resolutely correct market procyclical behavior, resolutely deal with acts disrupting market order, resolutely prevent the risk of exchange rate overadjustment, and maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level. Explore and expand the central bank's macroprudential and financial stability functions, maintain financial market stability, and firmly adhere to the bottom line that systemic financial risks do not occur.

This article was selected from “Central Bank Official Website”; Zhitong Finance Editor: Huang Xiaodong.