On December 27, the Monetary Policy Committee of the People’s Bank of China (PBOC) held the fourth quarterly meeting of 2024 (its 107th meeting).
It was noted at the meeting that since the beginning of 2024, the PBOC has intensified macro adjustments, pursued a sound monetary policy that was flexible, moderate, precise, and effective, firmly adhered to an accommodative monetary policy stance, strengthened counter-cyclical adjustments, improved monetary policy framework, and used a mix of policy tools, such as interest rates, the required reserve ratio (RRR), central bank lending and the purchase and sale of government bonds, thereby serving the high-quality development of the real economy and creating a sound monetary and financial environment for economic recovery. The loan prime rate (LPR) reform has achieved remarkable results, and the mechanism for market-oriented adjustments of deposit rates has played its due role. The monetary policy transmission has become more efficient, and the financing costs for the real economy have been kept at a record-low level. Supply and demand in the foreign exchange market have been basically in equilibrium, current account surplus has remained stable, and foreign exchange reserves have been adequate. The RMB exchange rate has moved in both directions with stabilizing expectations and remained basically stable at an adaptive and equilibrium level.
The economic and financial developments both at home and abroad were analyzed. It was noted that while inflationary pressures have eased, the negative implications of external changes have intensified and world economic growth remains sluggish. The major economies are witnessing diverging economic performances and are turning to a rate-cutting cycle concerning their monetary policies. China’s economy has remained generally stable, with steady progress being made. Solid progress has been achieved in high-quality development. However, challenges persist, including insufficient domestic demand and a range of potential risks. The PBOC should implement an appropriately accommodative monetary policy, strengthen counter-cyclical adjustments, give play to the role of monetary policy instruments in adjusting both the aggregate and the structure, and heighten coordination between monetary and fiscal policies to sustain stable economic growth and ensure overall price stability.
The monetary policy for the next stage was discussed. It was proposed that monetary policy adjustments should be intensified, with a focus on improving their foresightedness, targetedness and effectiveness. RRR and interest rates may be cut depending on the domestic and external economic conditions and financial market developments. Liquidity will be kept adequate, and financial institutions will be guided to expand money and credit supply, aiming to ensure that the aggregate financing to the real economy (AFRE) and money supply be generally in line with the expected economic growth and price level The PBOC will strengthen the guiding role of central bank policy rates, improve the market-oriented interest rate formation and transmission mechanisms, and give full play to the role of the self-regulatory pricing mechanism for market interest rates. The implementation of interest rate policies will be reinforced to promote a steady reduction in financing costs for businesses and consumer credit costs for individuals. Additionally, the PBOC will enrich and improve the monetary policy toolkit, buy and sell government bonds, and closely monitor long-term yield changes. It will smooth the mechanism of monetary policy transmission to promote more efficient use of funds and to prevent the funds from simply circulating within the financial system. It will enhance the resilience of the foreign exchange market, stabilize market expectations, and enhance market management. The PBOC will also resolve market disorders, prevent the formation and self-fulfilling of one-sided and unanimous expectations, guard against the risks of exchange rate overshooting, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level.
The work needed to be done to deepen the supply-side structural reform of the financial sector was discussed. It was noted that large-sized banks should be guided to play a leading role in providing financial services for the real economy, while small and medium-sized banks should be encouraged to focus on their main duties and major businesses, and banks should be supported in capital replenishment. The financial sector will make joint efforts to safeguard the stable development of the financial market. The PBOC will make good use of existing structural monetary policy tools, improve work in the areas of technology finance, green finance, inclusive finance, old-age finance and digital finance, and continue to intensify support for major national strategies, key fields, and weak links, so as to speed up the development of new quality productive forces and meet reasonable consumer financing needs in a more targeted manner. New tools, such as the securities, funds, and insurance companies swap facility, and the central bank lending facility for share buyback and shareholding increase, will be leveraged effectively to safeguard the stability of the capital market. Additionally, the PBOC will expedite central bank lending for sci-tech innovation and technological transformation, and step up financial support for large-scale equipment renewal and trade-in of consumer goods. It will improve financial services for the development and growth of the private economy and fully utilize the coordination mechanism to support the financing of micro and small businesses, thus further removing barriers to financing for micro, small, and medium-sized enterprises. Work will be done to ensure the existing financial policies are well implemented and deliver results. This involves quickening the pace to activate the inventory of for-profit properties and land use, stabilizing the real estate market which has witnessed a fall, and improving the fundamental rules for real estate financing to support the establishment of a new development model for the sector. Further efforts will be made to implement financial policies designed to promote the healthy development of the platform economy. Steps will be taken to advance the high-level two-way opening-up of the financial sector, and enhance the capacity for economic and financial management as well as risk prevention and control in an open economy.
It was stressed at the meeting that efforts should be made, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, to fully implement the requirements of the 20th National Congress of the Communist Party of China (CPC), the Central Economic Work Conference, and the Central Financial Work Conference, as well as the decisions and arrangements made by the CPC Central Committee and the State Council. Firmly pursuing high-quality development as a top priority, the PBOC will solidly promote Chinese modernization, apply the new development philosophy fully and faithfully on all fronts, and speed up building a new development paradigm. It will pursue the strategy of expanding domestic demand while concurrently deepening supply-side structural reform, and it will enhance macroeconomic policy coordination. It will effectively implement the existing policies and see to it that incremental policies take effect. Aiming to achieve a good start, the PBOC will expand domestic demand, stabilize expectations, and stimulate market vitality to promote sustained economic recovery.
The meeting was chaired by Pan Gongsheng, Governor of the PBOC and Chairman of the Monetary Policy Committee. Members of the Monetary Policy Committee, including Xu Shouben, Li Chunlin, Liao Min, Li Yunze, Wu Qing, Kang Yi, Zhu Hexin, Gu Shu, Wang Yiming and Huang Haizhou attended the meeting. Xuan Changneng and Huang Yiping took a leave of absence for official businesses. Attendees also included officials from the PBOC branches in Heilongjiang Province, Zhejiang Province, Anhui Province, Shaanxi Province and Ningxia Hui Autonomous Region.
