The People's Bank of China (PBOC) has outlined its monetary policy stance, emphasizing a strengthening of counter-cyclical and inter-temporal adjustments and suggesting that a shift towards higher-quality, slower-growing credit could become a new norm for the macroeconomy.
At a press conference held by the State Council Information Office, Zou Lan, a PBOC spokesperson and Deputy Governor, presented the monetary policy execution and financial statistics for the first half of 2026. Key points from the briefing are summarized below.
PBOC: The Central Bank's Toolkit is Extensive, Including Reserve Requirements, Reverse Repos, MLF, and Treasury Transactions
Deputy Governor Zou Lan stated that in terms of quantity-based tools, the PBOC possesses a very rich toolkit, including reserve requirement ratios, reverse repos, medium-term lending facilities (MLF), and treasury bond transactions. Reserve requirement ratio cuts primarily focus on injecting long-term liquidity, while reverse repos and MLF target short- to medium-term liquidity. The central bank will appropriately select and combine these tools based on liquidity management needs.
PBOC: Will Guide and Regulate Interest Rate Levels Based on Economic Performance, Price Trends, and Macro-Control Needs
Zou Lan indicated that regarding interest rates, the PBOC will subsequently guide and regulate interest rate levels based on macroeconomic performance, price trends, and the needs of macro-control, aiming to keep the overall social financing cost at a low level.
PBOC: First-Half Tool Injections Effectively Offset a 1 Trillion Yuan Liquidity Gap from Factors Like Reserve Requirements
Zou Lan noted that the volume of various central bank tool injections in the first half effectively offset a 1 trillion yuan liquidity gap caused by factors such as reserve requirement payments and cash withdrawals. The average overnight rate (DR001) in the money market for the first six months was 1.31%, indicating overall stable operation.
PBOC: The Singular Loan Indicator No Longer Fully Reflects Real Economy Financing Conditions
Xie Guangqi, Director of the PBOC's Monetary Policy Department, stated that the central bank is continuously optimizing and improving the monetary policy framework, promoting a transition from a primarily quantity-based to a primarily price-based regulatory framework to foster an appropriate monetary and financial environment. The singular loan indicator can no longer fully reflect the financing conditions obtained by the real economy. It is suggested to observe the sum of loans and bonds together, while paying more attention to indicators that comprehensively reflect social financing conditions, such as interest rates and financing structure.
PBOC: Slower Credit Growth with Improved Quality May Become a New Norm in Macroeconomic Operation
Xie Guangqi stated that in the coming period, monetary and credit will shift from extensive expansion to intensive development. Slower credit growth with improved quality may become a new norm in macroeconomic operation.
PBOC: The RMB Exchange Rate is Expected to Continue Two-Way Fluctuations
Zou Lan said that looking ahead, factors affecting the RMB exchange rate are diverse, with both upward and downward pressures present. The RMB exchange rate is expected to continue two-way fluctuations.
PBOC: Studying a Gradual Increase in the Frequency of Overnight Reverse Repo Operations
Zou Lan stated that the next step involves continuing to steadily and orderly promote the reform and improvement of the monetary policy operational framework to better guide the market overnight rate to operate stably near the policy rate. The PBOC will study gradually increasing the frequency of overnight reverse repo operations in conjunction with primary dealers' needs and maintain good communication with the market.
PBOC: It is Inappropriate to Judge Central Bank Policy Stance Based on the Size of a Single Open Market Operation
Zou Lan emphasized that the PBOC will comprehensively consider changes in various factors to reasonably arrange the types and scale of open market operations, sometimes withdrawing and sometimes injecting liquidity, ultimately maintaining total liquidity at an appropriate level to promote short-term rates operating stably near the policy rate. The size of any single operation serves the need for total liquidity regulation, and it is inappropriate to judge the central bank's policy stance based on it. Compared to the central bank's operation volume, the level of short-term market interest rates is a more suitable observation indicator.
PBOC: Strengthen Counter-Cyclical and Inter-Temporal Adjustments to Consolidate and Expand the Momentum of Economic Stabilization and Improvement
Zou Lan stated that the central bank will, based on domestic and international economic and financial situations and financial market operations, grasp the intensity, pace, and timing of monetary policy implementation, strengthen counter-cyclical and inter-temporal adjustments, focus on expanding domestic demand and optimizing supply, enhance the endogenous driving force of economic development, and continuously consolidate and expand the momentum of economic stabilization and improvement.
PBOC: Weighted Average Interest Rate for New Corporate Loans from January to June Was Approximately 3%
From January to June, the weighted average interest rate for newly issued corporate loans was approximately 3%, about 20 basis points lower than the same period last year. The interest rate for newly issued personal housing loans was approximately 3.1%, basically flat year-on-year.