On May 9, the People's Bank of China (PBOC) released the "China Monetary Policy Implementation Report" (hereinafter referred to as the "Report") for the first quarter of 2025, which reflected the transformation of macroeconomic policy thinking from different perspectives. The role of macroeconomic policy has shifted from a more investment-oriented approach in the past to an equal emphasis on consumption and investment, with a greater emphasis on consumption.

What information to look out for in the report? Jingtai helps you decipher.

Changing thinking: The central bank has clarified the new direction of "paying equal attention to consumption and investment".

In October last year, Pan Gongsheng mentioned at the Financial Street Forum that the role of macroeconomic policies should be shifted from more investment in the past to equal emphasis on consumption and investment, and more attention should be paid to consumption. This marks a major shift in macroeconomic policy thinking.

For example, in Box 2, policies are more focused on promoting consumption. At present, the proportion of China's final consumption expenditure in GDP is still lower than that of the United States, Japan and other countries, which means that we still have a lot of potential to tap. In the face of the adverse impact of external demand, it is necessary to give higher priority to promoting consumption and domestic demand.

In order to support this transformation, the People's Bank of China announced on May 7 the establishment of a 500 billion yuan refinancing for service consumption and pension, and officially issued a notice on May 9. This policy aims to encourage and guide financial institutions to increase financial support for key areas of service consumption such as accommodation and catering, sports and entertainment, education, and the pension industry.

Market experts believe that this kind of policy from the consumption and supply side can better meet the needs of the masses for consumption upgrading. In the future, if it can be coordinated with other fiscal and industry policies, more synergies can be generated.

Box 5 of the report compares the government debt of China, the United States and Japan from the perspective of the balance sheet of government departments, and the results show that the debt of the Chinese government is supported by assets. According to the report, the total assets of China's broad government are equivalent to 166% of GDP, the total liabilities are equivalent to 75% of GDP, and the net assets account for about 91% of GDP.

Industry insiders believe that the expansion of China's government debt is supported by corresponding assets, which is of great significance for strengthening people's livelihood security, improving income distribution, promoting economic transformation and dynamic balance. Since the beginning of this year, the issuance of new local special bonds has accelerated, with a total of nearly 1 trillion yuan issued in the first quarter, which has effectively stimulated investment growth and boosted confidence.

Box 6 of the report clearly points out that the key to promoting a reasonable recovery in prices lies in expanding effective demand. At present, the operation of low prices in China is affected by multiple factors: on the demand side, the downward pressure on consumption continues, and investment in traditional areas such as local government financing platforms and real estate has shrunk significantly. On the supply side, the "involution" competition in some industries is serious, and it is difficult for industry self-discipline to effectively prevent low-price dumping.

According to industry experts, prices first depend on the supply and demand of commodities, and currency is a secondary factor. Therefore, the idea of price regulation and control should be shifted from the previous prevention of "price gouging" to the prevention of "dumping at low prices". The government's price management should also shift from encouraging enterprises to "exchange price for quantity" to guiding enterprises to "win by quality".

Jingtai briefly summarizes these policy changes and trends:

Macroeconomic policy shifts to both consumption and investment: The policy focus has shifted from pure investment to equal emphasis on consumption and investment, with particular emphasis on the contribution of consumption to economic growth.

Set up a 500 billion yuan re-loan to support the development of accommodation and catering, culture, sports and entertainment, education and other fields, as well as the pension industry, and improve the consumption and supply capacity.

Government debt is backed by assets: China's government debt has a good asset base, which helps to enhance market confidence.

Promote a reasonable recovery in prices: Promote a reasonable recovery in prices by expanding effective demand, with a particular focus on consumption and innovation.

For investors, these policy signals suggest that consumption and innovation will be important drivers of future economic growth.

The central bank continues to "release water to raise fish" and maintain an accommodative tone

Overall, the PBOC's policy stance is very clear: continue to be supportive of monetary policy, remain moderately accommodative, flexibly carry out open market operations, and use a variety of aggregate and structural tools to ensure sufficient market liquidity.

In other words, the money is not too tight, it is not too loose, just right.

Although the RMB exchange rate is facing external pressure, it has remained basically stable under the protection of multiple policies. The overall operation of the financial market has also been relatively stable, with no major ups and downs.

The policy operation is more refined and efficient, and there are also some optimizations and adjustments in specific operations: there are changes in the way the medium-term lending facility (MLF) wins the bid, which may be fairer and more market-oriented; Two capital market support tools were launched to help stabilize sentiment in the stock and bond markets; The re-lending of supporting agriculture and the re-lending of supporting small enterprises have been merged into "re-lending to support agriculture and small enterprises", simplifying the process and improving efficiency.

These adjustments may seem small, but in fact, they are all aimed at making the flow of funds to the real economy more smoothly, especially small and micro enterprises and the agricultural sector.

What does the market think? Faith is still there! Market participants generally believe that the effect of the central bank's repeated RRR and interest rate cuts in recent years is gradually emerging, and the financing environment is generally loose. More importantly, new policy signals are also being released, indicating that the central bank is not "lying flat", but continuing to exert force.

They summarized three key directions:

1. Increase support for the real economy

This is highly consistent with the spirit of the Politburo meeting of the CPC Central Committee, sending a positive signal: monetary policy will continue to remain moderately loose to escort steady economic growth.

Enterprises and ordinary people can rest assured that the financing channels are still smooth and the difficulty of loans is relatively controllable.

Second, consumption is the key to expanding domestic demand

Against the backdrop of weak external demand, the focus of expanding domestic demand has shifted to boosting consumption. To this end, the central bank has also set up a new tool - 500 billion yuan of service consumption and pension re-loans, targeted support for accommodation and catering, sports and entertainment, education, pension and other service industries.

Experts expect that the consumption potential of the service industry will be further released in the future, and related sectors may also usher in a wave of opportunities.

3. Actively respond to the impact of US tariffs

The report mentions "tariff policy" several times, indicating that the central bank is highly concerned about the trade movements of the United States. In the face of external uncertainties, macro policies have been actively responding, such as stabilizing foreign trade expectations through financial means.

This also means that more policies may be introduced in the future to help export enterprises relieve pressure and maintain the fundamentals of foreign trade.

What's next? President Pan Gongsheng gave the answer! At the press conference of the State Council Information Office on May 7, Pan Gongsheng, Governor of the People's Bank of China, announced a package of blockbuster financial policies, including: ten measures in three categories: continue to cut the reserve requirement ratio and interest rates; optimizing structural monetary policy tools; Introducing new tools to support scientific and technological innovation. In a word, it can be summed up: shoot when it's time to shoot, both stable and progressive!

Judging from this report and recent policy trends, Jingtai believes that the central bank's thinking is very clear, keep the monetary policy moderately loose, and do not engage in "flooding", but also do not let the market lack money; Precise drip irrigation of the real economy, especially in the fields of consumption, science and technology, pension, small and medium-sized enterprises; Actively respond to external risks, stabilize foreign trade and expectations, and do not let external shocks affect the overall domestic situation.

For investors, this means we can focus on:

sectors related to consumption recovery (e.g. tourism, catering, education, elderly care services);

scientific and technological innovation and industrial upgrading (chips, AI, high-end manufacturing);

The financial real estate chain that benefits from the loose policy (especially high-quality real estate enterprises and urban investment transformation platforms).

The central bank's "new posture": making the policy rate clearer

In July last year, the central bank clarified an important rule: the 7-day reverse repo operation rate is our policy rate, that is, this is the most direct "weather vane" of the central bank's policy direction.

What about this year? The PBOC has also adjusted the tendering model for the Medium-Term Lending Facility (MLF), further downplaying its "policy rate" overtones and returning it to its original role as a tool to provide medium-term liquidity, rather than a "microphone" for monetary policy signals.

To put it simply: the 7-day reverse repo rate determines the short-term cost of funds; The MLF interest rate is more of a reflection of the supply and demand of funds in the medium and long term. In this way, the division of labor is clearer, the interest rate system is clearer, and it is easier for the market to understand the intentions of the central bank.

Why? Experts say this is to promote the establishment of a more market-oriented and transparent interest rate control mechanism. Just as Governor Pan Gongsheng said at the Lujiazui Forum before: we need to make the interest rate transmission mechanism smoother and the policy effect more accurate.

At present, the central bank adjusts the policy interest rate (such as the 7-day reverse repo) to affect the interest rate of the interbank market (such as the interbank certificate of deposit interest rate) and the bond market interest rate (such as the yield of treasury bonds), and then gradually transmit it to the loan interest rate and deposit interest rate that we ordinary people are most concerned about.

In this way, we can better influence everyone's consumption and investment behavior, and improve the overall social demand.

Loan interest rates are already low, but there are "hidden fees", and the report also mentions an interesting statistic: the weighted average interest rate on corporate loans in March was about 3.3%, a year-on-year decrease of about 0.5 percentage points, which is at a historical low.

Doesn't that sound good? However, experts caution us to one thing: the interest rate on loans is already low, but the cost of financing is not necessarily low. Why? Because many companies report that in addition to interest, there are also many "additional fees" - such as mortgage guarantee fees, appraisal fees, financial advisory fees, etc. Some businesses have non-interest costs that are even higher than the interest itself!

In order to solve this problem, the central bank began to implement the practice of "clearly indicating the comprehensive financing cost of enterprise loans" last year, giving enterprises a "loan understanding paper" and listing all expenses clearly, so that enterprises and banks can "reconcile accounts and settle accounts clearly".

It's a good idea, but it's not enough. Next, financial institutions need to change their thinking, not just thinking about how to earn service fees, but really providing valuable services to enterprises. At the same time, local governments and financial departments should also cooperate to reduce the burden on enterprises. Of course, enterprises themselves cannot drop the chain, and credit construction and financial management must keep up.

Finally, the report also devotes itself to the bond market. In recent years, China's bond market has developed rapidly, and its support for the real economy has become more and more intense. But there are also many problems, especially the risks posed by interest rate fluctuations.

For example, although treasury bonds are issued by the state and there is no credit risk, it does not mean that there is no risk. If market interest rates rise, the price of Treasuries will fall, and investors may lose money. This is known as "interest rate risk".

Therefore, the central bank is also strengthening institutional construction, such as improving information disclosure, optimizing trading mechanisms, and strengthening investor protection, so that the bond market can go more stable and further.

To sum up, the content of the report is a bit dry, but in fact, the core idea is very simple: the central bank is building a clearer and more efficient interest rate system to make policy signals easier to understand; Loan interest rates are already low, but non-interest costs need to continue to fall; The bond market is developing rapidly, but interest rate risks cannot be ignored, and institutional construction must keep up.

For investors, these will be the focus of the next continuous tracking.