On December 18, the Monetary Policy Committee of the People’s Bank of China (PBOC) held the fourth quarterly meeting of 2025 (its 111th meeting).
It was noted at the meeting that since the beginning of this year, the PBOC has intensified macro adjustments, and pursued an appropriately accommodative monetary policy. It sustained its efforts while intensifying them as appropriate, strengthened the counter-cyclical adjustments, and used a mix of monetary policy tools, thereby supporting the high-quality development of the real economy and creating a sound monetary and financial environment for the growth of the economy while maintaining sustainability. 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, 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 shifting external environment has been exerting a deepening impact, with faltering 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 maintained overall stability with steady progress, achieving new progress in high-quality development. However, it still faces salient misalignment between strong supply and weak demand, among other issues and challenges. It is necessary to continue implementing an appropriately accommodative monetary policy, intensify the counter-cyclical and intertemporal adjustments, give play to the role of monetary policy instruments in adjusting both the aggregate and the structure, and enhance coordination between monetary and fiscal policies, thus promoting stable economic growth and fostering a moderate recovery of price levels.
The meeting discussed the guiding principles for monetary policy in the next phase, proposing to leverage the synergy effect of existing policies and new ones, comprehensively utilize various tools, and strengthen monetary policy regulation. Based on domestic and international economic and financial situations as well as financial market functioning, the PBOC will appropriately manage the intensity and pace of policy implementation in a timely manner. It will keep liquidity adequate to ensure that the growth of aggregate financing to the real economy and the money supply are aligned with economic growth and the expected target level of prices, thereby keeping overall financing costs in the economy at a low level. 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 PBOC will observe and evaluate the functioning 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. 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 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 strengthen banks' capital. 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 financial support for key areas, including boosting domestic demand, promoting sci-tech innovation, and ensuring the stable operation of micro, small and medium-sized enterprises. 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 financial sector shall continue to provide financial services to support the development of private enterprises. 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 fourth 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, steadfastly advance Chinese modernization, apply the new development philosophy fully, faithfully and comprehensively, and speed up building a new development paradigm. It will place greater emphasis on reinforcing the domestic economy as the mainstay, balance the relationship between aggregate supply and demand, enhance the foresight, precision, and coordination of macro policies, focus on expanding domestic demand and optimizing supply. The PBOC will improve incremental growth and revitalize existing resources, thereby continuously consolidating and sustaining the momentum of steady economic improvement.
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 Xuan Changneng, Zou Lan, Li Yunze, Wu Qing, Kang Yi, Zhu Hexin, Gu Shu, Wang Yiming and Huang Haizhou, attended the meeting. Xu Shouben, Li Chunlin, Liao Min, and Huang Yiping took a leave of absence for official businesses. Attendees also included officials from the PBOC municipal, provincial and autonomous region branches in Tianjin, Jiangsu, Jiangxi, Xinjiang, and Shenzhen.
