The central bank's latest report sets the tone: moderate easing of monetary policy will "maintain the current stance"！

2025 is the final year of the 14th Five-Year Plan. The national economy continues its steady progress, and the main goals of economic and social development are being successfully achieved. The annual gross domestic product (GDP) grew by 5% year-on-year. On February 10, the People’s Bank of China released the Monetary Policy Implementation Report for the fourth quarter of 2025, stating that it is firmly implementing the decisions and deployments of the Party Central Committee and the State Council, maintaining a moderately relaxed monetary policy. Based on the effective implementation of existing monetary policies, it has introduced a package of monetary and financial policy measures, strengthened countercyclical adjustments, and effectively supported the stable growth of the real economy and the smooth operation of financial markets.

Continued Strong Support for Credit

In 2025, the People’s Bank of China adopted multiple measures to implement a moderately relaxed monetary policy.

On one hand, it comprehensively uses various monetary policy tools such as reserve requirement ratios and open market operations to maintain ample liquidity. It guides financial institutions to strengthen project reserves and credit issuance to fully meet the effective credit needs of the real economy. On the other hand, it promotes a downward trend in the overall social financing cost. This includes lowering policy interest rates, structural monetary policy tool rates, and personal housing provident fund loan rates, strongly supporting the reduction of social financing costs.

Additionally, efforts are being increased to support major strategic projects, key sectors, and weak links. The structure of monetary policy tools has been enriched and improved, credit structures have been optimized, and the “five big articles” of financial support are being well managed. This includes increasing re-lending quotas for technological innovation and technological transformation by 300 billion yuan each, creating 500 billion yuan in re-lending for service consumption and elderly care, and 200 billion yuan in risk-sharing tools for technological innovation bonds.

From multiple perspectives—total financial volume, price, and structure—the effects of the moderately relaxed monetary policy in 2025 are gradually becoming evident.

Specifically, the total financial volume maintained rapid growth, with the social financing scale and broad money supply (M2) at the end of the year increasing by 8.3% and 8.5% year-on-year, respectively, significantly higher than the nominal GDP growth rate. After accounting for local government debt impacts, RMB loans are still around 7%, indicating sustained strong credit support.

The overall social financing cost has decreased, with new corporate loan rates and personal housing loan rates around 3.1% in December 2025. The credit structure continues to improve, with technology loans, green loans, inclusive loans, elderly care industry loans, and digital economy industry loans growing by 11.5%, 20.2%, 10.9%, 50.5%, and 14.1% year-on-year, respectively. Loans in key sectors have maintained double-digit growth, consistently outpacing overall loan growth.

It is worth noting that the RMB exchange rate has remained basically stable amid complex circumstances. At the end of 2025, the RMB/USD exchange rate closed at 6.9890, appreciating 4.4% compared to the end of 2024. The China Foreign Exchange Trade System (CFETS) RMB exchange rate index was 97.99, depreciating 3.4% from the end of 2024.

The Effects of Existing Policies Will Continue to Manifest

Currently, China’s overall economic operation remains stable with steady progress, and high-quality development has achieved new results. However, challenges such as strong supply but weak demand still exist.

The People’s Bank of China states that in the next stage, it will continue to implement a moderately relaxed monetary policy. Promoting stable economic growth and reasonable price increases will remain key considerations. It will adjust the policy implementation strength, pace, and timing based on domestic and international economic and financial conditions and financial market operations. It will flexibly and efficiently use tools such as reserve requirement ratio cuts and interest rate reductions to maintain ample liquidity and relatively relaxed social financing conditions, guiding the reasonable growth of total financial volume and balanced credit issuance, aligning social financing scale and money supply growth with economic growth and inflation expectations.

At the same time, it will further improve the interest rate regulation framework, strengthen the guidance of the People’s Bank of China’s policy interest rates, improve the market-oriented interest rate formation and transmission mechanism, leverage the self-regulation of market interest rates, enhance the implementation and supervision of interest rate policies, reduce banks’ liability costs, and promote low levels of social financing costs.

Additionally, it will orderly expand the scope of explicit corporate loan financing cost work. It will leverage both the total and structural functions of monetary policy tools to effectively implement various structural monetary policy instruments, solidify the “five big articles” of financial support, and strengthen financial support for expanding domestic demand, technological innovation, and small and micro enterprises.

Adhering to a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies, will maintain exchange rate flexibility, utilize the exchange rate as a macroeconomic and balance of payments automatic stabilizer, strengthen expectations guidance, prevent overshooting risks, and keep the RMB exchange rate basically stable at a reasonable and balanced level.

Furthermore, efforts will be made to expand and enrich the macroprudential and financial stability functions of the central bank, improve the macroprudential and financial stability management toolbox, maintain financial market stability, and firmly guard against systemic financial risks.

Industry experts believe that the moderately relaxed monetary policy last year has a cumulative effect, and the policy effects of existing policies will continue to manifest. In early 2026, the People’s Bank of China introduced a new set of monetary and financial measures to support high-quality development of the real economy. These incremental policies will work in synergy with existing policies to further create a suitable monetary and financial environment for stable growth of the real economy and reasonable price increases.

(Source: Beijing Business Daily)