On March 21, the People's Bank of China Monetary Policy Committee in the first quarter of 2025 (the 108th in total) regular meeting news: It is recommended to increase the intensity of monetary policy regulation, improve the forward-looking, targeted and effective monetary policy regulation, and choose the opportunity to reduce the RRR and interest rates according to the domestic and foreign economic and financial situation and the operation of the financial market.
What are the noteworthy investment information from the conference? Jingtai interprets it for you.
Monetary policy is stable
Jingtai believes that this year's macroeconomic control policy can be described as "stable", with moderate monetary policy easing and increased counter-cyclical adjustment, which has created a good monetary and financial environment for the sustained economic rebound. The reform of the loan prime rate (LPR) has achieved remarkable results, the market-oriented adjustment mechanism of deposit interest rates has also played a positive role, the transmission efficiency of monetary policy has been improved, and the cost of social financing is at a historical low. The supply and demand of the foreign exchange market are balanced, the current account surplus is stable, the foreign exchange reserves are sufficient, and the RMB exchange rate fluctuates in both directions but is expected to stabilize, and the overall level remains at a reasonable and balanced level. The financial market has been running smoothly on the whole, with no major ups and downs.
From a global perspective, the external environment is more complex and severe, the world economic growth momentum is insufficient, the performance of major economies is clearly differentiated, and the uncertainty of inflation trends and monetary policy adjustments is also rising. On the other hand, in China, the overall economic operation is stable and high-quality development is steadily advancing, but it still faces challenges such as insufficient domestic demand and many risks and hidden dangers.
In the face of these challenges, the meeting proposed to continue to implement a moderately loose monetary policy, strengthen counter-cyclical adjustment, and give full play to the dual functions of monetary policy tools in terms of aggregate volume and structure. At the same time, monetary and fiscal policies should be coordinated to ensure stable economic growth and price prices at a reasonable level.
From an investment perspective, the current monetary policy environment provides stable liquidity support for the market: social financing costs are at historically low levels, and the financing environment for enterprises has improved, which is conducive to the development of the real economy. The RMB exchange rate fluctuates in both directions but is expected to stabilize, reducing the risk of volatility in the foreign exchange market.
Take the opportunity to cut the RRR and interest rates
Jingtai set a clear tone for the next stage of monetary policy for this meeting: "flexible regulation, precise force, and progress while maintaining stability". The meeting suggested intensifying monetary policy regulation and control, improving the forward-looking, targeted and effective policy, and reducing the reserve requirement ratio and interest rates in a timely manner according to the domestic and foreign economic situation and the operation of the financial market, so as to maintain abundant liquidity. At the same time, we should guide financial institutions to increase credit supply and ensure that the scale of social financing and money supply match the expected targets of economic growth and price levels.
The meeting also stressed the need to strengthen the guiding role of the central bank's policy interest rate, improve the market-oriented interest rate formation mechanism, give play to the role of the self-discipline mechanism of market interest rate pricing, and ensure the effective implementation and supervision of the interest rate policy. The goal is to promote the reduction of comprehensive financing costs in society, observe the operation of the bond market from a macro-prudential perspective, focus on changes in long-term yields, ensure the efficient use of funds, and prevent capital idling.
In terms of the foreign exchange market, the meeting proposed to enhance market resilience, stabilize market expectations, strengthen management, resolutely correct pro-cyclical behaviors, crack down on behaviors that disrupt market order, prevent the risk of exchange rate overshoot, and ensure that the RMB exchange rate remains basically stable at a reasonable and balanced level.
The meeting also mentioned that it is necessary to make full use of the swap facilities of securities, funds, insurance companies, stock repurchase and re-lending, explore normalized institutional arrangements, and maintain the stability of the capital market. At the same time, we will continue to provide financial services for the development of the private economy, support the financing of small and micro enterprises, and further break through the blocking points and stuck points of financing for small and medium-sized enterprises.
In terms of real estate, the meeting proposed to promote the implementation of the financial policies that have been introduced, increase the vitality of the stock of commercial housing and land, promote the real estate market to stop falling and stabilize, improve the basic system of real estate finance, and help build a new model of real estate development. In addition, the meeting also emphasized the need to implement financial policies to promote the healthy development of the platform economy, promote high-level two-way financial opening-up, and improve economic and financial management capabilities and risk prevention and control capabilities under open conditions.
In Jingtai's view, these policies convey two important messages:
Timely RRR and interest rate cuts and increased credit supply will provide sufficient liquidity support for the market. The reduction of comprehensive social financing costs will directly benefit enterprises, especially micro, small and medium-sized enterprises and private enterprises.
The total amount is loose and the structure is accurate
In terms of aggregate, the state of monetary policy is supportive, and the overall situation is relatively loose. In contrast, although the Fed cut interest rates three times last year by a total of 100 basis points, the policy rate is still high, and the state of monetary policy is still restrictive. The People's Bank of China has cut the RRR and interest rates several times in recent years, and this year it will take the opportunity to further cut the RRR and interest rates according to the domestic and foreign economic situation and the operation of the financial market.
At present, the reserve requirement ratio of financial institutions is 6.6% on average, and there is still room for downward movement, and there is room for downward adjustment of the funding rate of structural monetary policy instruments. The central bank will also make comprehensive use of tools such as open market operations, medium-term lending facilities, and re-lending and re-discounting to maintain sufficient market liquidity, reduce the cost of bank liabilities, promote the reduction of comprehensive social financing costs, and ensure that the scale of social financing and money supply match the expected targets of economic growth and price levels.
In terms of structure, monetary policy will pay more attention to precise force, and increase financial support for major strategies, key areas and weak links. Specific measures include: expanding re-lending for scientific and technological innovation: further expanding the scale of re-lending for scientific and technological innovation and technological transformation, broadening policy coverage, and guiding financial institutions to increase support for science and technology finance, green finance, inclusive small and micro enterprises, pension finance and other fields. Creation of new tools: Study the creation of new structural monetary policy tools, with a focus on supporting scientific and technological innovation, consumption promotion and foreign trade stability. Capital market support: Make good use of the two monetary policy tools to support the capital market, and explore normalized institutional arrangements with the China Securities Regulatory Commission to maintain the stable development of the capital market.
From an investment perspective, aggregate easing is good for the market: RRR cuts, interest rate cuts and abundant liquidity will provide sufficient financial support for the market, which is good for the stock and bond markets. Structural opportunities are highlighted: Technological innovation, green finance, inclusive small and micro enterprises and other fields will receive more policy dividends, and investors can pay attention to opportunities in related sectors.
