To boost the economy, the People's Bank of China decided to do this

Amid global uncertainty, the People's Bank of China (PBOC) pledged to cut interest rates and keep the yuan stable.

Amid global uncertainty, the People's Bank of China (PBOC) pledged to cut interest rates and keep the yuan stable. (Source: Getty)

The People's Bank of China said on March 13 that it is considering creating more structural tools to support innovation, domestic consumption and exports in an effort to steer the world's second-largest economy through a period of rising global uncertainty.

Pan Gongsheng, governor of the PBOC, reiterated his commitment to cutting interest rates and reserve requirement ratios (RRR) for commercial banks to boost economic growth during the meeting. Meanwhile, the PBOC will keep the yuan stable and manage financial risks amid external tariff pressures.

"We will use a range of monetary policy tools, including open market operations, to ensure ample liquidity and align money supply and social financing growth with economic and inflation goals," Pan Gongsheng said.

The PBOC governor did not elaborate on what new tools the bank might introduce, but the PBOC has turned to re-lending tools to support various sectors of the economy in recent years.

Last week, the PBOC announced plans to double the size of its lending facility to support the tech sector to 1 trillion yuan ($138 billion) during the “two sessions,” the annual gathering of China’s top legislative and advisory bodies.

The moves are in line with Beijing's decision to shift China's monetary policy from a "prudent" stance to "slightly loose" for 2025, as policymakers focus on stimulating consumption.

Domestic consumption has been sluggish for more than two years, prompting authorities to lower this year’s inflation target to 2%. The consumer price index fell 0.1% in the first two months of 2025, prompting the government to take more drastic action.

Accommodative monetary policy is being used to counter external pressure on exports, following US President Donald Trump's decision to increase tariffs on Chinese goods by 20%.

Premier Li Qiang has just planned to issue an additional 300 billion yuan of ultra-long-term special treasury bonds and raise the fiscal deficit by 1 percentage point to 4% to facilitate further growth-boosting measures.

In the past two meetings, Pan Gongsheng noted, there is “plenty of room” for the PBOC to cut RRR and interest rates further, a commitment he made in December.

China made two RRR cuts last year, each by 0.5 percentage points, injecting 1 trillion yuan of liquidity into the market. The average RRR in China is now at 6.6%.

At a meeting on March 13, the PBOC said it will increase support for the capital market, provide financial support to institutions to address domestic debt risks, and strengthen the real estate finance system through improving macro-prudential management.

At the same time, the Bank will maintain the stability of the RMB by letting the market play a decisive role in setting the exchange rate and boost market expectations by improving policy transparency.

"We will promote the internationalization of the yuan in a stable and measured manner, and gradually open up financial services and markets in an orderly manner."

Source: https://baoquocte.vn/tro-luc-cho-nen-kinh-te-ngan-hang-nhan-dan-trung-quoc-quyet-dinh-lam-dieu-nay-307559.html