The People's Bank of China recently released the China Monetary Policy Implementation Report for the first quarter of 2025 (hereinafter referred to as the "Report"). Regarding the main ideas of monetary policy in the next stage, the Report clearly states that a moderately relaxed monetary policy should be implemented well, the spirit of the Political Bureau of the Central Committee should be implemented, and a package of financial policies launched in May will be actively implemented. It is worth noting that the signal released by this report shows that in the next step, the People's Bank of China will further implement moderately loose monetary policies to create a good financial environment for expanding consumption, including introducing a package of policy measures for financial consumption promotion, researching and issuing guiding documents to support consumption.

  The report shows that the People's Bank of China continues to adhere to a supportive policy stance, implement moderately loose monetary policies, flexibly carry out open market operations, comprehensively use various total and structural policy tools to maintain abundant liquidity, maintain basic stability in complex situations, and the overall operation of the financial market is stable.

  At the same time, specific policy operations have been further optimized, such as adjusting the winning method of medium-term lending facilities (MLF), making good use of two capital market support tools, and combining agricultural re-loans and small-school re-loans into agricultural and small-school re-loans.

  Authoritative experts in the industry said that with the support of various monetary policies, monetary credit has grown reasonably, the cost of social comprehensive financing has steadily declined, the credit structure has been further optimized, and the cumulative effect of many years of reserve requirement ratio cuts and interest rate cuts has continued to emerge, and the social financing environment is generally in a relatively relaxed state.

  In fact, new policy signals are being released, including further increasing support for the real economy and expanding consumption.

  In October last year, when speaking at the Financial Street Forum, People's Bank of China Governor Pan Gongsheng said that the role of macroeconomic policies should shift from more in the past to focusing on investment and paying equal attention to consumption and investment, and paying more attention to consumption. Focusing on boosting and expanding consumption, the Report has conducted a special discussion, and service consumption and pension re-lending were officially launched recently. The market expects that the consumption potential in the service field is expected to be further stimulated and released in the future.

  The report emphasized that in recent years, the growth rate of domestic consumption has slowed down, but under the dual effects of policy guidance and market mechanism, the vitality of the consumer market is gradually being released, and the growth rate has shown a steady recovery trend, showing a positive signal of recovery and improvement. Financial support for consumption has a good foundation, and there is still room for further efforts. At present, the construction of multi-level consumer finance service systems such as banks, consumer finance companies, and automobile finance companies in my country is relatively complete, providing important support for the stable development of the consumer market.

  The report stated that in the next stage, the People's Bank of China will implement moderately loose monetary policies to create a good financial environment for expanding consumption. Issue a package of policy measures to promote consumption by financially promoting consumption, study and issue guiding documents for financial support for consumption; continuously optimize consumer credit products and services; enhance the fund supply capacity of consumer finance institutions, support automobile finance companies and consumer finance companies to issue financial bonds; and build an efficient and convenient payment ecosystem.

  Looking back at the monetary policy operation in the first quarter, policy interest rate adjustment is one of the key contents. The reporter noticed that the report reviewed the changes in the tool design, positioning and characteristics of MLF over the past ten years in the form of a column, and pointed out that in the future MLF will return to the basic positioning of medium-term liquidity placement tools and reasonably cooperate with other tools to maintain sufficient liquidity.

  Dong Ximiao, chief researcher of China United Network, said that my country's interest rate transmission mechanism from short to long has been gradually straightened out to form a relatively complete interest rate system. By adjusting policy interest rates, the People's Bank of China affects the money market interest rates and bond market interest rates, and affects the deposit and loan interest rates, thereby promoting consumption and investment and increasing total social demand.

  Regarding the monetary policy in the next stage, the report proposes to maintain sufficient liquidity so that the scale of social financing and the growth of money supply are matched with the expected targets of economic growth and total price level; to promote a reasonable recovery of prices as an important consideration for grasping monetary policy, and to promote prices to remain at a reasonable level.

  In terms of interest rates, the Report clearly states that the monetary policy transmission mechanism will be smoothed, the interest rate regulation framework will be further improved, the implementation and supervision of interest rate policies will be continuously strengthened, the cost of bank debt will be reduced, and the cost of social comprehensive financing will be reduced.

  In terms of exchange rate, the report emphasizes that we should adhere to the decisive role of the market in exchange rate formation, enhance the resilience of the foreign exchange market, stabilize market expectations, and maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level. (Reporter Xiang Jiaying)

[Editor in charge: Wang Mengmeng]