Decoding the Central Bank's Q1 Monetary Policy Meeting: Reduce financing intermediary costs and optimize structural tool management

Recently, the Monetary Policy Committee of the People’s Bank of China held its first-quarter 2026 regular meeting. As an important “barometer” for judging the future direction of monetary policy, the meeting released a series of key policy signals.

When assessing the domestic and international economic and financial situation, the meeting believed that the impact of changes in the external environment has deepened, global economic momentum remains weak, and geopolitical conflicts and trade conflicts are occurring frequently and repeatedly. The economic performance of major economies has shown divergence, and there is uncertainty regarding inflation trends and monetary policy adjustments. The meeting also stated that China’s economic operation is generally stable and progressing steadily, with new achievements in high-quality development, but it still faces issues such as strong supply and weak demand, external shocks, and other challenges.

Compared with the fourth-quarter 2025 meeting, this meeting added new expressions such as “frequent geopolitical conflicts and trade conflicts” and “facing external shocks.” In February 2026, the Iran-U.S. conflict escalated, severely disrupting shipping through the Strait of Hormuz, a critical chokepoint for global energy transportation, leading to a sharp rise in international oil prices and risks of imported inflation in some countries.

Mingming, chief economist at CITIC Securities, told reporters that since the deterioration of the Iran-U.S. conflict in the first quarter of this year, expectations of a global recession have potential impacts on China’s external demand. Imported inflation from commodities like crude oil also poses certain challenges for China’s price management. From the stance of the People’s Bank of China, the wording “promoting stable economic growth and a reasonable rebound in prices” remains unchanged. Going forward, more attention may be paid to hedging the impacts of overseas geopolitical risks and trade conflicts on domestic input effects.

This meeting discussed the main ideas for the next phase of monetary policy. It recommended leveraging the combined effects of incremental and stock policies, using multiple tools comprehensively, strengthening monetary policy regulation and management, and, based on domestic and international economic and financial conditions and financial market operations, carefully controlling the policy strength, pace, and timing. This statement is fully consistent with that of the fourth-quarter 2025 meeting.

An industry expert told reporters that China’s monetary policy still has room for maneuver. It is well-founded and feasible to continue creating a suitable social financing environment and supporting stable economic growth. However, given the uncertainty in the economic environment, maintaining flexibility in monetary policy is also very necessary. The expert also said that during the “14th Five-Year Plan” period and beyond, building a scientific and prudent monetary policy system requires adhering to the principle of policy stability, balancing short-term and long-term considerations, growth and risk prevention, internal and external factors, strengthening counter-cyclical and cross-cyclical adjustments, avoiding excessive expansion or tightening of monetary policy, and supporting the steady operation of the macroeconomy.

Lowering intermediary financing costs for enterprises and individuals

Of particular concern is that, while maintaining low social financing costs, this meeting newly proposed “standardizing credit market practices and reducing intermediary financing costs,” which aligns with the relevant expressions in the 2026 government work report.

On March 6, at the economic press conference of the Fourth Session of the 14th National People’s Congress, Pan Gongsheng, governor of the People’s Bank of China, stated that interest rates will be guided and managed according to changes in the economic and financial situation and macroeconomic performance, to promote social comprehensive financing costs at a low level. Strengthening the implementation and supervision of interest rate policies, and regulating unreasonable market behaviors that could weaken monetary policy transmission, are emphasized. Banks are required to clearly disclose to enterprises the annualized comprehensive financing costs of loans and to standardize intermediary costs.

Mingming explained that “intermediary financing costs” refer to various additional fees paid by enterprises or individuals during financing, beyond principal and interest, and are an important part of comprehensive financing costs. Going forward, fees such as service charges and channel fees may be prioritized for reduction compared to overall interest rate cuts.

In the past two years, the People’s Bank of China has piloted explicit disclosure of the comprehensive financing costs for corporate loans, guiding commercial banks to clearly present the annualized total costs to enterprises. In these pilots, banks, together with enterprises, fill out the “Corporate Loan Comprehensive Financing Cost List” (also known as the “Loan Transparency Sheet”), clarifying the interest and non-interest costs enterprises must bear, and standardizing intermediary and hidden costs.

Personal loan comprehensive financing costs will also become more transparent. On March 15, the Financial Regulatory Administration and the People’s Bank of China jointly issued the “Provisions on Explicit Disclosure of Comprehensive Financing Costs for Personal Loan Business” (hereinafter referred to as the “Provisions”), requiring lenders to present borrowers with a clear schedule of comprehensive financing costs, disclosing personal loan interest and fee costs transparently, making all personal loan costs “sunshine” and “transparent.” The Provisions include all costs related to personal loans into the comprehensive financing costs, including but not limited to interest, installment fees, credit enhancement service fees, and other financing costs, as well as overdue penalty interest and contingent costs in case of default.

The Provisions require lenders to explicitly disclose to borrowers each specific cost item, collection method, collection standard (converted into annualized levels), and collection entity when conducting personal loan business. They also clearly remind that, aside from the disclosed costs, neither the lender nor its partners will charge any other interest or fee related to the loan.

Dong Ximiao, chief economist of Ronglian and deputy director of the Shanghai Finance and Development Laboratory, pointed out that this indicates that, despite corporate and personal loan interest rates being at historic lows, reducing financing costs is not simply about lowering interest rates. Previously, comprehensive financing costs often included hidden charges such as guarantee fees, appraisal fees, and bridge fees. The phrase “standardizing credit market practices and lowering intermediary costs” aims to eliminate these intermediary and hidden costs, allowing enterprises and individuals to more directly and transparently feel the decline in financing costs, enhancing their experience and sense of gain.

Optimizing the management of structural monetary policy tools

This meeting also proposed making good use of various structural monetary policy tools, optimizing their management, and solidly advancing the “five major financial strategies,” with an emphasis on supporting key areas such as expanding domestic demand, technological innovation, and small and micro enterprises. Compared with the fourth-quarter 2025 meeting, this meeting added the new proposal to “make good use of various structural monetary policy tools and optimize their management.”

Wang Yunjin, chief researcher at the Guangkai Chief Industry Research Institute, told reporters that a major highlight of this year’s moderately loose monetary policy is the optimization and innovation of structural tools, with expectations of continued expansion. Pan Gongsheng also stated at the economic press conference of the 14th National People’s Congress that focusing on key areas, maintaining rational and appropriate levels, and allowing room for both progress and retreat, will help optimize the structural monetary policy system.

Wang Yunjin noted that China’s current structural monetary policy tools are numerous and cover a broad range. Early this year, the relending rate was cut by 0.25 percentage points, with some quota expansions and innovations in tools. This year, further reductions in relending rates may be considered to further enhance the positive role of structural tools in supporting economic restructuring, improving livelihoods, and stabilizing investment, especially in key areas such as expanding domestic demand, technological innovation, and small and micro enterprises.

In January, the People’s Bank of China also clarified at the 2026 credit market work conference that the authorities will further improve mechanisms related to the “five major areas” of finance, implement incremental policies for structural monetary tools, strengthen coordination with fiscal policies, and vigorously develop science and technology finance, green finance, inclusive finance, pension finance, and digital finance, while increasing financial support for consumption. A multi-level financial service system will be built, focusing on supporting key areas such as expanding domestic demand, technological innovation, and small and micro enterprises.

At that time, a local regulatory official told reporters that one of the key points of the above meetings was “implementing incremental policies for structural monetary tools and strengthening coordination with fiscal policy,” which aligns closely with the earlier statements by the central bank about increasing support for structural monetary tools and further aiding the transformation and upgrading of the economic structure.

In response, Sheng Songcheng, professor at China Europe International Business School and director of the China Chief Economist Forum Research Institute, explained that China still faces many “old problems” and new challenges in its economic development, making the role of structural policies even more crucial. On one hand, fiscal policy can directly intervene in economic activities to promote structural adjustments. On the other hand, structural monetary policy, by increasing incentives for commercial banks, can also help improve the effectiveness of fiscal policy implementation and play a role in policy integration, thereby stimulating endogenous growth in the economy.