According to a news release from the People's Bank of China (PBOC) on January 4, the PBOC's 2025 work conference was held from January 3 to 4. Regarding capital markets, the conference emphasized the importance of fully utilizing two structural monetary policy tools that support the capital market and exploring regular institutional arrangements to maintain the stable operation of capital markets.
Recently, the People's Bank initiated the second round of securities, fund, and insurance company swap convenience operations, with a total amount of 55 billion yuan, which was completed on January 2. To further strengthen policy support and facilitate operations for participants, financial regulatory authorities have also adjusted policies related to stock repurchase and increase loan issuance.
Concerning monetary policy, the conference proposed implementing a moderately loose monetary policy to create a favorable monetary and financial environment for stable economic growth. A variety of monetary policy tools will be used in a comprehensive manner, and the reserve requirement ratio (RRR) and interest rates may be reduced based on domestic and international economic conditions and the financial market's operation. The goal is to ensure sufficient liquidity, stable growth in the overall financial volume, and alignment between social financing scale, money supply growth, and economic growth, as well as price level expectations. Efforts will be made to better balance the relationship between stock and increment, focusing on revitalizing existing financial resources and improving the efficiency of fund utilization. The stability of the RMB exchange rate will be maintained at a reasonable and balanced level, and risks of excessive exchange rate fluctuations will be firmly prevented.
Zou Lan, Director of the PBOC's Monetary Policy Department, stated that the PBOC will further improve the market-based interest rate adjustment mechanism, strengthen the execution of interest rate policies, enhance self-discipline management of interest rates, and improve the ability of banks to set interest rates autonomously and rationally. These efforts will aim to support the healthy operation of the banking industry and reduce the overall financing cost for society, creating a favorable interest rate environment to boost consumption and expand investment.
On serving high-quality economic development, the conference called for better coordination of the "five major financial tasks" to better serve economic high-quality growth. This includes improving the top-level institutional arrangements for the "five major tasks," unifying statistical systems, strengthening assessment and evaluation, focusing on key areas, weak links, and major national economic strategies, and further enhancing the strength, sustainability, and specialization of financial support. The conference also highlighted the importance of applying structural monetary policy tools scientifically and in a balanced manner, optimizing the tool system, and improving coordination with fiscal policies to enhance financial support for technological innovation and consumption growth. Financial channels will be expanded to support businesses in raising funds through bonds, equity, and other market-based methods, improving financial service efficiency.
Regarding risk prevention, the conference emphasized the need to fully leverage the macroprudential and financial stability functions of the central bank to ensure that systemic financial risks do not materialize. A macroprudential policy framework will be improved, with enhanced assessments of systemic financial risks and an enriched set of macroprudential policy tools. Financial market risk monitoring, assessment, warning, and response mechanisms will be strengthened to maintain market stability. The conference also stressed that market-based and law-based principles should be applied to support risk management in small and medium-sized banks, as well as resolving local government financing platform debt risks. Efforts to improve and strengthen real estate financial macroprudential management will support the development of a new model for the real estate sector.
Additionally, the conference proposed steadily advancing financial reform and opening-up, enhancing the internationalization of the RMB, and increasing the functionality of the bond market to better serve the real economy. Financial infrastructure construction and supervision will be strengthened, and the financial sector's high-level openness will be expanded in an orderly manner. Support will be provided for the construction of Shanghai as an international financial center, and efforts will be made to consolidate and enhance Hong Kong’s position as an international financial center, while safeguarding financial security under open conditions. The internationalization of the RMB will continue to progress steadily, with efforts to further enhance its role as a global currency, utilize currency swaps and RMB clearing functions effectively, and promote the development of offshore RMB markets. Policies aimed at improving the convenience of cross-border fund settlements, such as multinational companies' cash pools, will also be improved, and reforms in foreign exchange management for foreign direct investment will be advanced. Lastly, the management of foreign exchange reserves will continue to be conducted prudently.
