The People's Bank of China (PBOC) has announced plans to reduce reserve requirement ratios (RRRs) and interest rates in 2025, aiming to stimulate economic growth and support various sectors. Pan Gongsheng, governor of the PBOC, highlighted that the current average RRR stands at 6.6%, indicating potential for further reductions.
Lowering the RRR allows financial institutions to hold fewer reserves, thereby increasing their lending capacity. This move is expected to inject more liquidity into the market, making funds more accessible for businesses and consumers. Additionally, the PBOC plans to decrease the rates at which it provides funds to commercial banks through structural monetary policy instruments.
Pan emphasized the use of a diverse set of monetary tools, including open market operations, medium-term lending facilities, re-lending, rediscounts, and policy rates, to ensure ample liquidity in the financial system. These measures aim to reduce the liability costs for banks and lower the overall costs of social financing.
Furthermore, the central bank is exploring new structural monetary policy instruments to bolster investment and financing in the areas of scientific and technological innovation, boost consumer spending, and stabilize foreign trade. These initiatives are part of China's broader strategy to sustain its economic momentum and adapt to both domestic and international financial conditions.
As China navigates the evolving global economic landscape, these policy adjustments are designed to provide the necessary support for continued growth and resilience in key economic sectors.
Reference(s):
China to cut RRRs, interest rates in 2025, says central bank governor
cgtn.com
