China’s central bank has unveiled a multifaceted approach to bolster economic growth in 2024, a strategy that experts say is effectively supporting the real economy.
The People’s Bank of China (PBOC) has cut the reserve requirement ratio twice, releasing approximately 2 trillion yuan ($274 billion) in liquidity. In July and September, the PBOC lowered the interest rate of the 7-day open market reverse repurchase operation by 10 and 20 basis points respectively, guiding the medium-term lending facility rate, the loan prime rate (LPR), and other rates downward.
“This year’s interest rate and reserve requirement ratio cuts have been significant, frequent, and beyond expectations,” said Dong Ximiao, chief researcher at Merchants Union Consumer Finance, in an interview with China Media Group (CMG). “These measures have effectively lowered interest rates, reduced borrowing costs for businesses and households, boosted market confidence, and stimulated effective demand.”
The PBOC has established a special relending facility worth 500 billion yuan for scientific and technological innovation and transformation, a 300 billion yuan special relending facility for affordable housing, and increased the relending quota for agriculture and small businesses by 100 billion yuan to support key areas of high-quality development.
“China currently utilizes 20 structural monetary policy tools, specifically targeting the needs of key sectors, vulnerable areas, and businesses within the real economy. These tools are crucial in facilitating economic restructuring, upgrading, and the emergence of new growth drivers, such as green development and technological innovation,” Dong commented.
“The current level of financing is stable, with the stock of social financing exceeding 40 trillion yuan, effectively supporting the real economy,” said Lou Feipeng, a researcher at China Postal Savings Bank, in an interview with People’s Daily.
Looking ahead, the Central Economic Work Conference has adjusted the tone of monetary policy from “prudent” to “moderately loose” for 2025, signaling a strong commitment to supporting economic recovery.
“‘Moderately loose’ indicates a continuation of comprehensive policy measures,” said Zou Lan, director of the monetary policy department of the PBOC, in an interview with CMG. “This policy will not only maintain strong support for economic growth but also enhance investor confidence, stimulate consumption, and foster a virtuous cycle of economic activity,” Zou added.
Reference(s):
China's monetary policy boosts 2024 economic growth: Experts
cgtn.com
