PBoC: to implement a targeted and moderate easing monetary policy

PBoC: to implement a targeted and moderate easing monetary policy

The People's Bank of China (PBOC) has announced plans to implement a targeted and moderate monetary policy easing in response to ongoing economic challenges. This move comes as part of a broader strategy to bolster the Chinese economy amidst external pressures such as tariffs and slowing growth.

The PBOC's decision to ease monetary policy is in line with the government's efforts to support the economy through various measures, including increased financing, diversification of export markets, and boosting domestic consumption. The central bank has been proactive in signaling its willingness to expand debt and fiscal support if needed, as indicated by the recent increase in the annual fiscal deficit target to 4% and the issuance of significant amounts of treasury bonds [1].

In the first half of 2025, the PBOC has issued a total of 7.88 trillion RMB worth of bonds, up 35.28% year-on-year, and has taken steps to unlock greater liquidity by lowering the Reserve Requirement Ratio (RRR) and expanding re-lending quotas. These measures are aimed at infusing long-term liquidity into the economy and supporting high-end manufacturing sectors, rural businesses, and agricultural production [1].

The targeted nature of the monetary policy easing is evident in the PBOC's focus on specific sectors and initiatives. For instance, the central bank has expanded re-lending quotas for technological innovation, small businesses, and agriculture, as well as for boosting service consumption and elderly care. This targeted approach is designed to address the unique challenges faced by different sectors of the economy and to maximize the impact of the monetary policy easing [1].

While the PBOC's monetary policy easing is a significant step, it is important to note that the Chinese economy faces deeper challenges. Shrinking revenues and weak confidence point to deeper cracks in the economy, and the demand for goods and services is largely engineered rather than organic. However, the government's efforts to boost domestic consumption and maintain employment levels are crucial for mitigating the impact of tariffs and ensuring social stability [1].

The PBOC's targeted and moderate monetary policy easing is a key component of the Chinese government's broader strategy to support the economy. As the central bank continues to navigate the complexities of the global economy, investors and financial professionals should closely monitor the impact of these policy measures and their implications for the Chinese economy.

References:
[1] https://www.thinkchina.sg/economy/engineered-growth-can-china-hold-its-economy-together