China Unveils Sweeping Monetary Policy Package to Stabilize Markets and Boost Confidence

CFP

AsianFin — China’s central bank rolled out a comprehensive package of monetary policy measures on Tuesday aimed at stabilizing financial markets and bolstering economic expectations, according to a press briefing held by the State Council Information Office.

People’s Bank of China (PBOC) Governor Pan Gongsheng announced the initiative, which includes 10 key measures across three major categories. These steps are designed to inject liquidity, lower financing costs, and support key sectors such as technology, consumption, housing, and small businesses.

Key highlights of the policy package include:

• Reserve Requirement Ratio (RRR) Cut:
  A 50-basis-point cut in the reserve requirement ratio is expected to release approximately 1 trillion yuan in long-term liquidity into the market.
• Targeted RRR Adjustments:
  The reserve ratio for auto finance and financial leasing companies will be temporarily reduced from 5% to 0%, further freeing up capital.
• Policy Rate Reduction:
  The seven-day reverse repurchase rate in open market operations will be lowered by 10 basis points, from 1.5% to 1.4%, likely driving down the Loan Prime Rate (LPR) by a similar margin.
• Structural Policy Tool Rate Cut:
  Interest rates on structural monetary tools will be reduced by 25 basis points to enhance policy transmission.
• Lower Housing Provident Fund Loan Rates:
  Rates for individual housing loans under the public housing fund will be cut by 25 basis points. The rate for first-time buyers with loans over five years will drop from 2.85% to 2.6%, with other maturities adjusted accordingly.
• Increased Tech Lending Support:
  The quota for re-lending to support technological innovation and industrial upgrades will be expanded by 300 billion yuan, raising the total from 500 billion to 800 billion yuan.
• New Re-lending Program for Services and Elder Care:
  A 500 billion yuan facility will be created to encourage banks to expand credit support for the service consumption and elderly care sectors.
• Boost Inclusive Financing:
  An additional 300 billion yuan will be added to re-lending for agriculture and small businesses, in coordination with a cut in associated tool rates to support rural and private-sector lending.
• Consolidation of Capital Market Support Tools:
  Two existing tools—500 billion yuan in swap facilities for securities firms and insurers, and 300 billion yuan for stock repurchase re-lending—will be combined into a unified 800 billion yuan facility to support market stability.
• New Risk-Sharing Tool for Tech Bonds:
  A risk-sharing mechanism for science and technology innovation bonds will be introduced. The central bank will provide low-cost re-lending to purchase such bonds and share partial default risks alongside local governments and credit enhancement institutions, helping tech firms and equity investors access long-term, low-cost financing.

Governor Pan emphasized that these measures aim to provide targeted, sustainable support to the real economy, especially in strategic sectors, while maintaining overall financial stability.