People's Bank of China: Continue to implement a moderately easy monetary policy

May 11, the People’s Bank of China released the “2026 Q1 China Monetary Policy Implementation Report” (hereinafter referred to as the “Report”). The “Report” shows that since the beginning of this year, the national economy has started strongly, with key indicators outperforming expectations, demonstrating strong resilience and vitality. In the first quarter, the gross domestic product (GDP) grew by 5% year-on-year.

The People’s Bank of China resolutely implements the decisions and deployments of the Party Central Committee and the State Council, continues to carry out moderately easing monetary policy, leverages the effects of both stock and incremental policies, strengthens counter-ccyclical and cross-cyclical adjustments, and creates a suitable monetary and financial environment for sustained and high-quality economic development.

The “Report” indicates that the impact of changes in the external environment has deepened, global economic growth momentum remains weak, geopolitical risks continue to rise, supply shocks and imported inflation pressures have emerged, major economies show divergent economic performances, and uncertainties exist in the adjustment of monetary policies by various central banks. China’s economy is progressing toward high-quality development with new advantages, but the foundation for steady growth still needs further consolidation. Meanwhile, the long-term positive fundamentals and basic trends of China’s economy remain unchanged, with institutional and major country advantages continuously manifesting. Confidence must be maintained, advantages fully utilized, various risks and challenges calmly addressed, and efforts made to enhance economic resilience and solidify development foundations.

In the next phase, the People’s Bank of China will fully implement the spirit of the Fourth Plenary Session of the 20th CPC Central Committee, the Central Economic Work Conference, and the National Two Sessions, firmly grasp the primary task of high-quality development, steadily promote Chinese-style modernization, adhere to the general tone of seeking progress while maintaining stability, fully and accurately implement new development concepts, accelerate the formation of a new development pattern, better coordinate domestic and international situations, precisely and effectively implement moderately easing monetary policy, focus on expanding domestic demand and optimizing supply, improve incremental growth and activate stock, enhance endogenous economic momentum, and continuously consolidate and expand the positive momentum of economic stability and growth. Unwaveringly follow the path of financial development with Chinese characteristics, further deepen financial reform and high-level opening-up, accelerate the building of a strong financial nation, improve the central bank system, establish a scientific and prudent monetary policy framework and a comprehensive macro-prudential management system, and smooth the transmission mechanism of monetary policy.

The “Report” proposes to continue implementing a moderately easing monetary policy. Enhance policy foresight, flexibility, and targeting based on domestic and international economic and financial conditions and financial market operation, properly grasp the intensity, rhythm, and timing of policy implementation, strengthen coordination between monetary and fiscal policies, smooth the transmission of monetary policy, and promote stable economic growth and reasonable price levels. Flexibly use various monetary policy tools to maintain ample liquidity and relatively relaxed social financing conditions, guide the reasonable growth of total financial assets and balanced credit deployment, so that the scale of social financing and money supply growth align with economic growth and inflation expectations. Further improve the interest rate regulation framework, strengthen the guidance of central bank policy rates, improve the market-oriented interest rate formation and transmission mechanism, leverage the self-discipline of market interest rate pricing, strengthen the implementation and supervision of interest rate policies, reduce banks’ liability costs, guide financial institutions to improve interest rate pricing capabilities, and promote low overall financing costs. Continue to deepen the work on comprehensive corporate loan financing costs. Fully utilize the total and structural functions of monetary policy tools, optimize tool management, solidly implement the “Five Major Articles” of financial work, strengthen financial support for expanding domestic demand, technological innovation, and small and micro enterprises. Persist in a market supply and demand-based, basket-referenced, managed floating exchange rate system, maintain exchange rate flexibility, leverage the exchange rate’s role in macroeconomic regulation and automatic stabilizer of the balance of payments, implement comprehensive measures, enhance foreign exchange market resilience, stabilize market expectations, prevent exchange rate overshoot risks, and keep the RMB exchange rate basically stable at a reasonable and balanced level. Expand and enrich the macro-prudential and financial stability functions of the central bank, improve the macro-prudential and financial stability management toolbox, maintain the smooth operation of financial markets, and resolutely guard against systemic financial risks.

【Author: Han Yu】 (Editor: Wen Jing)

Keywords: Monetary Policy