The People's Bank of China has stated it is prepared to increase the quotas of its monetary policy tools and refine their design based on market demand, aiming to strengthen support for critical areas such as domestic demand expansion and technological innovation.
At a press conference held by the State Council Information Office, Zou Lan, a spokesperson and Deputy Governor of the PBOC, outlined the central bank's policy direction. He noted that this year, in line with decisions from the Party Central Committee and the State Council, the PBOC has implemented a moderately accommodative monetary policy, maintaining ample liquidity to support the economy's transition towards new growth drivers and a strong start to the 15th Five-Year Plan period.
Key Financial Indicators and Policy Stance
Zou indicated that key macro-financial indicators reflect the accommodative monetary policy stance, with relatively loose overall financing conditions and continuous improvements in the quality and efficiency of financial services to the real economy.
Looking ahead to the second half of the year, the PBOC will implement central directives by enhancing the foresight, flexibility, and precision of monetary policy. It will strengthen counter-cyclical and cross-cyclical adjustments based on domestic and international economic and financial conditions, aiming to foster a suitable monetary and financial environment for stable growth, high-quality development, and smooth financial market operations.
Utilizing a Diverse Policy Toolkit
Regarding quantitative measures, Zou highlighted the central bank's extensive toolkit, which includes reserve requirement ratios, reverse repurchase agreements, medium-term lending facilities, and treasury bond transactions. He explained that reserve requirement ratio cuts primarily aim to inject long-term liquidity, while tools like reverse repos and MLFs provide short and medium-term funds. The PBOC will appropriately select and combine these tools based on liquidity management needs to maintain ample liquidity and ensure growth in total social financing and money supply aligns with economic growth and price level targets.
Interest Rate Policy and Economic Conditions
On interest rates, Zou acknowledged that while China's economy has maintained overall stability and a positive trend towards new growth drivers, demonstrating strong resilience, the foundation for sustained stable improvement requires further consolidation. Regarding prices, he noted that external factors have led to a relatively noticeable rebound in the Producer Price Index, while Consumer Price Index increases have been moderate. The PBOC will guide and regulate interest rate levels based on macroeconomic performance, price trends, and the needs of macro-control, aiming to keep overall financing costs in the economy low.
Focus on Structural Monetary Tools
Zou emphasized that the PBOC will continue leveraging the role of structural monetary policy tools and other monetary and financial policies. Guided by supply-side structural reforms in finance, the focus will be on continuously improving the quality and efficiency of financial services to the real economy and optimizing the credit structure.
This involves implementing the series of structural monetary policy measures introduced earlier this year, continuously refining tool design and management. The PBOC stands ready to increase tool quotas and optimize policy elements based on market demand to bolster support for key areas including domestic demand expansion, technological innovation, and micro, small, and medium-sized enterprises.
Concurrently, the central bank will guide financial institutions to scientifically assess risks, implement differentiated policies, and improve the efficiency of capital utilization.