Central Bank: In the next stage, we will selectively lower the reserve requirement ratio and interest rates based on domestic and international economic and financial conditions and the operation of the financial market

According to news from the People's Bank of China on January 3, the Monetary Policy Committee of the People's Bank of China held its regular meeting for the fourth quarter of 2024. The meeting discussed the main ideas for the next phase of monetary policy, suggesting an increase in the intensity of monetary policy regulation, enhancing the foresight, targeting, and effectiveness of monetary policy regulation, and appropriately lowering the reserve requirement ratio and interest rates based on domestic and international economic and financial conditions and the operation of financial markets. It aims to maintain ample liquidity, guide financial institutions to increase the intensity of monetary credit issuance, and ensure that the growth of social financing scale and money supply aligns with economic growth and the expected targets for overall price levels.

The meeting also discussed deepening the structural reforms on the supply side of finance, pointing out the need to guide large banks to play a leading role in providing financial services to the real economy, promote small and medium-sized banks to focus on their main responsibilities, support banks in replenishing capital, and jointly maintain the stable development of the financial market. It emphasized the effective implementation of various existing structural monetary policy tools, focusing on five major areas: technology finance, green finance, inclusive finance, pension finance, and digital finance, while continuing to increase support for major strategies, key areas, and weak links, accelerating the development of new quality productivity, and more effectively meeting reasonable consumption financing needs. It also highlighted the importance of utilizing newly established tools such as the swap convenience between securities, funds, and insurance companies, as well as stock repurchase and increased re-loans, to maintain stability in the capital market.

The original text is as follows:

The Monetary Policy Committee of the People's Bank of China held its regular meeting for the fourth quarter of 2024

The Monetary Policy Committee of the People's Bank of China held its fourth quarter meeting (the 107th in total) on December 27, 2024.

The meeting noted that since the beginning of 2024, the intensity of macroeconomic regulation has increased, with a prudent monetary policy being flexible, moderate, precise, and effective, firmly supporting the economy, strengthening counter-cyclical adjustments, optimizing and improving the monetary policy framework, and comprehensively using tools such as interest rates, reserve requirements, re-loans, and government bond transactions to serve the high-quality development of the real economy, creating a suitable monetary and financial environment for economic recovery. The reform of the loan market quotation rate has shown significant results, and the market-oriented adjustment mechanism for deposit rates has effectively played its role, enhancing the efficiency of monetary policy transmission, with social financing costs at historically low levels. The foreign exchange market is basically balanced in supply and demand, the current account surplus is stable, foreign exchange reserves are sufficient, the RMB exchange rate is fluctuating in both directions with stable expectations, and it remains basically stable at a reasonable and balanced level.

The meeting analyzed the domestic and international economic and financial situation, noting that the adverse impacts of changes in the external environment have deepened, inflationary pressures have eased, but the momentum for global economic growth is weak, with differentiated economic performance among major economies, leading to a shift into a rate-cutting cycle for monetary policy. The overall operation of China's economy is stable, with steady progress in high-quality development, but it still faces difficulties and challenges such as insufficient domestic demand and numerous risk hazards. It is necessary to implement a moderately loose monetary policy, strengthen counter-cyclical adjustments, better utilize the dual functions of monetary policy tools in terms of both quantity and structure, and enhance the coordination between monetary and fiscal policies to maintain stable economic growth and overall price stability.

The meeting discussed the main ideas for the next phase of monetary policy, suggesting an increase in the intensity of monetary policy regulation, enhancing the foresight, targeting, and effectiveness of monetary policy regulation, and appropriately lowering the reserve requirement ratio and interest rates based on domestic and international economic and financial conditions and the operation of financial markets. It aims to maintain ample liquidity, guide financial institutions to increase the intensity of monetary credit issuance, and ensure that the growth of social financing scale and money supply aligns with economic growth and the expected targets for overall price levels Strengthen the guidance of central bank policy interest rates, improve the transmission mechanism for market-oriented interest rate formation, leverage the self-discipline mechanism of market interest rate pricing, enhance the execution of interest rate policies, and promote a stable decrease in corporate financing and household credit costs. Enrich and improve the monetary policy toolbox, conduct government bond trading, and pay attention to changes in long-term yields. Smooth the transmission mechanism of monetary policy, improve the efficiency of fund utilization, and prevent idle capital turnover. Enhance the resilience of the foreign exchange market, stabilize market expectations, strengthen market management, resolutely address behaviors that disrupt market order, firmly prevent the formation of unilateral consistent expectations that become self-fulfilling, and effectively guard against risks of excessive exchange rate adjustments, maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level.

The meeting studied the relevant work of deepening the structural reform of the financial supply side, pointing out the need to guide large banks to play a leading role in providing financial services to the real economy, promote small and medium-sized banks to focus on their main responsibilities, support banks in replenishing capital, and jointly maintain the stable development of the financial market. Effectively implement various existing structural monetary policy tools, and focus on five major areas: financial technology, green finance, inclusive finance, pension finance, and digital finance, while continuing to increase support for major strategies, key areas, and weak links, promoting the accelerated development of new productive forces, and more effectively meeting reasonable consumer financing needs. Make good use of newly established tools such as the convenience of swaps between securities, funds, and insurance companies, and stock repurchase increases and relending to maintain the stability of the capital market. Accelerate the process of loan issuance for technological innovation and technological transformation, and increase financial support for large-scale equipment updates and consumer goods exchanges. Continuously provide financial services to support the development and growth of the private economy, fully leverage the coordination mechanism for supporting financing for small and micro enterprises, and further unblock the financing bottlenecks and obstacles for small and medium-sized enterprises. Focus on promoting the implementation and effectiveness of the financial policy measures that have been introduced, increase efforts to revitalize existing commercial housing and land, promote the stabilization of the real estate market, improve the foundational system of real estate finance, and assist in constructing a new model for real estate development. Implement financial policy measures that promote the healthy development of the platform economy. Effectively advance high-level bilateral financial openness, and enhance economic and financial management capabilities and risk prevention capabilities under open conditions.

The meeting emphasized the need to be guided by Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era, fully implement the spirit of the 20th National Congress of the Communist Party, the Central Economic Work Conference, and the Central Financial Work Conference, and follow the decision-making arrangements of the Party Central Committee and the State Council, firmly grasp the primary task of high-quality development, solidly promote Chinese-style modernization, comprehensively and accurately implement the new development concept, and accelerate the construction of a new development pattern. Combine the implementation of the strategy to expand domestic demand with deepening supply-side structural reforms, enhance the coordination and cooperation of macro policies, effectively implement existing policies, strengthen the promotion of new policies to achieve results, ensure a good start, expand domestic demand, stabilize expectations, stimulate vitality, and promote the sustained recovery and improvement of the economy.

This meeting was chaired by Pan Gongsheng, Governor of the People's Bank of China and Chairman of the Monetary Policy Committee, with committee members Xu Shoubin, Li Chunlin, Liao Min, Li Yunze, Wu Qing, Kang Yi, Zhu Hexin, Gu Shu, Wang Yiming, and Huang Haizhou in attendance. Xuan Changneng and Huang Yiping were absent due to official duties. Responsible comrades from the Heilongjiang, Zhejiang, Anhui, Shaanxi branches of the People's Bank of China, and the Ningxia Hui Autonomous Region branch attended the meeting as observers This article is compiled from the People's Bank of China, edited by Zhitong Finance: Chen Wenfang.