On October 14, the People’s Bank of China released its latest financial data, indicating a trend of stabilization and recovery. This positive development closely correlates with the implementation of the central bank’s incremental monetary policy.
PBOC Governor Pan Gongsheng introduced the concept of a “supportive monetary policy stance” at this year’s Lujiazui Forum, and reiterated this commitment at the Second China-Portuguese-Speaking Countries Central Banks and Financial Institutions Conference held in September. He emphasized that the PBOC will continue to uphold this supportive policy.
According to Pan, while global inflation has decreased from its peak, it remains stubbornly high, with major developed economies maintaining high interest rates and restrictive monetary policies. In contrast, China’s monetary policy is aimed at supporting a sustained economic recovery.
How should we interpret this new concept of “supportive” monetary policy? Experts clarify that Pan’s reference to a supportive policy is a response to the restrictive monetary policies employed internationally, highlighting China’s increased effort to bolster the real economy. They argue that this approach does not contradict the notion of a prudent monetary policy.
The experts further noted that in the context of slowing domestic demand growth, a more proactive monetary policy would genuinely reflect its “supportive” effects, facilitating stable economic operations. Should downward economic pressures ease, the monetary policy would revert to a more conventional stance. “Looser when necessary, tighter when needed” exemplifies a balanced policy approach.
Industry insiders have indicated that this round of policy adjustments has prioritized two critical areas: real estate and the capital markets. Many believe that the current adjustment period for the real estate market has been notably prolonged, resulting in persistent market pessimism, which in turn affects economic performance.
Examining this year’s monetary policy operations, the PBOC has focused on fostering consensus across sectors, especially regarding the real estate market. In May, the bank optimized housing credit policies, established a re-loan program for affordable housing, and worked on reducing inventory of existing properties. In September, it further lowered the interest rates on existing home loans and reduced the minimum down payment requirements, extending the implementation period for certain real estate financial policies. Early indicators show that these measures are beginning to yield positive results in the real estate sector.
The stock market, often seen as a barometer of the macroeconomy and a reflection of market confidence, has also been supported by the introduction of two structural tools by the PBOC aimed at stabilizing its development. Following these policy introductions, stock prices have rebounded, significantly boosting market confidence.
Moreover, monetary policy is increasingly focused on facilitating economic structural transformation and upgrading. As the economy shifts towards high-quality growth and structural changes, the demand for credit within the real economy is evolving. The PBOC is now concentrating on key sectors and weaknesses, working to revitalize inefficient financial resources while continuing to refine the credit structure.
Industry experts suggest that the central bank’s multiple public statements throughout the year reflect a willingness to adapt its monetary control strategies in response to changing circumstances.
Pan Gongsheng has reiterated his commitment to maintaining price stability and encouraging moderate price recovery, guiding financial institutions to assess risks more scientifically and constraining financing to overcapacity industries while better meeting reasonable consumer finance demands. He also underscored the importance of collaborative policy efforts to enhance a consumption-driven strategy and improve supply-demand matching.
Overall, as China undergoes structural adjustments, upgrades, and transitions between old and new growth drivers, experts anticipate that future monetary policies will work in concert with other macroeconomic strategies to effectively stimulate domestic demand, particularly in expanding consumer spending, thereby facilitating dynamic equilibrium in the economy.
