On June 23, the Monetary Policy Committee of the People’s Bank of China (PBOC) held the second quarterly meeting of 2025 (its 109th meeting).
It was noted at the meeting that since the beginning of this year, the PBOC has intensified macro adjustments, pursued a moderately accommodative monetary policy, strengthened the counter-cyclical adjustments, and used a mix of monetary policy tools, thus supporting the high-quality development of the real economy and creating a sound monetary and financial environment for sustained economic recovery and growth. The benefits of the loan prime rate reform have continued to be unleashed, and the mechanism for market-oriented adjustments of deposit rates has functioned effectively. The monetary policy transmission has become more efficient, and the financing costs for the real economy have stood at historically low levels. 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 and remained basically stable at an adaptive and equilibrium level. The financial market has operated generally stable.
The meeting analyzed the economic and financial developments both at home and abroad, and pointed out that the current external environment is becoming increasingly complex and severe, with weakening momentum in global economic growth, rising trade barriers, diverging economic performance among major economies, and uncertainties surrounding inflation trends and monetary policy adjustments. China’s economy has witnessed an on-going recovery and growth, continuously uplifted social confidence, and steady progress in high-quality development, but it still faces challenges such as insufficient domestic demand, persistently low price levels, and various potential risks. It is necessary to implement a moderately accommodative monetary policy, strengthen the counter-cyclical adjustments, give play to the role of monetary policy instruments in adjusting both the aggregate and structure, and enhance coordination between monetary and fiscal policies, thus maintaining stable economic growth and reasonable price levels.
The meeting reviewed the main directions for monetary policy in the next stage and and proposed strengthening the intensity of monetary policy adjustments. It emphasized the need to enhance the foresight, precision, and effectiveness of monetary policy adjustments, and to flexibly manage the intensity and pace of policy implementation based on domestic and international economic and financial developments as well as financial market dynamics. The PBOC will keep liquidity adequate and guide financial institutions to increase the supply of money and credit, ensuring that the growth of aggregate financing to the real economy and the money supply is aligned with economic growth and the expected target level of prices. It will strengthen the guiding role of the central bank policy rates, improve the market-oriented interest rate formation and transmission mechanism, leverage the self-regulatory pricing mechanism for market interest rates, and enhance the implementation and supervision of interest rate policies. The overall financing costs for the real economy will be reduced. The PBOC will observe and evaluate the operation of the bond market from a macro-prudential perspective, and pay attention to changes in long-term yields. It will smooth the transmission mechanism of the monetary policy to improve the efficiency of capital utilization and prevent the circulation of funds within the financial system. The PBOC will enhance the resilience of the foreign exchange market, stabilize market expectations, and guard against the risk of exchange rate overshooting, so as to keep the RMB exchange rate basically stable at an adaptive and equilibrium level.
The meeting discussed efforts to deepen the supply-side structural reform of the financial sector and emphasized the need to guide large-sized banks to play their leading role in providing financial services for the real economy, encourage small and medium-sized banks to focus on their primary responsibilities and core businesses, and support banks in capital replenishment. In doing so, the financial sector will work together to safeguard the stable development of the financial market. The PBOC will make good use of the existing structural monetary policy tools, and make significant efforts in the areas of technology finance, green finance, inclusive finance, old-age finance and digital finance. It will step up support for sci-tech innovation and consumption boosting, and provide adequate financing backing for implementing major national strategies and building security capacity in key areas, as well as the large-scale renewal of equipment and the trade-in of consumer goods. It will make good use of the Securities, Funds and Insurance companies Swap Facility (SFISF) and central bank lending for stock buybacks and holding increases, and explore regular institutional arrangements, aiming to maintain the stability of the capital market. The PBOC will continue to provide better financial services for the development and growth of the private economy, fully leverage the coordination mechanism for facilitating financing for micro and small businesses, and further address bottlenecks and obstacles in financing for micro, small and medium-sized enterprises. It will strive to ensure that the introduced financial policy measures are implemented and deliver results, step up efforts to revitalize existing commercial housing and stock land, continue to stabilize the real estate market, improve the fundamental rules for real estate financing, and support the establishment of a new development model for the real estate sector. The PBOC will effectively advance the high-level two-way opening-up of the financial sector, and enhance the capacity for economic and financial oversight as well as risk management in an open economy.
It was stressed at the meeting that under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBOC will fully implement the guidelines of the third plenary session of the 20th Communist Party of China (CPC) Central Committee and the Central Economic Work Conference. According to the decisions and arrangements made by the CPC Central Committee and the State Council, the PBOC will firmly pursue high-quality development as a top priority, follow the Chinese path to modernization, apply the new development philosophy fully, faithfully and comprehensively, and speed up building a new development paradigm. The PBOC will place greater emphasis on strengthening the domestic economic circulation, better balance the relationship between aggregate supply and demand, enhance coordination among macroeconomic policies. Also, it will make good and full use of existing policies, enhance the implementation of incremental policies, fully unleash the benefits of related policies, so as to expand domestic demand, stabilize expectations, and stimulate vitality, and promote sustained economic recovery and growth.
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 Li Chunlin, Liao Min, Xuan Changneng, Li Yunze, Wu Qing, Kang Yi, Zhu Hexin, Gu Shu, Wang Yiming, Huang Yiping and Huang Haizhou, attended the meeting. Xu Shouben took a leave of absence for official businesses. Attendees also included officials from the PBOC Shanghai Head Office and its branches in Liaoning, Hunan, and Yunnan provinces.
