Chinese Central Bank to Cut Interest Rates and Reserve Requirements for Growth

Investing.com -- The People's Bank of China (PBOC) reiterated its commitment to lowering interest rates and the reserve requirement ratio for banks when the time is right, aiming to support economic growth. These measures come at a time when the Chinese economy continues to face challenges both domestically and internationally.

During its quarterly meeting held at the end of December, the PBOC's monetary policy committee emphasized the need to intensify the adjustments of the country’s monetary policy to make them more forward-looking, targeted, and effective. Committee members affirmed the necessity of a "moderately loose" monetary policy to support growth.

According to the meeting minutes, despite the challenges, the Chinese economy remains generally stable. However, they also pointed out issues such as the intensification of adverse effects due to insufficient domestic demand and changes in the external environment.

Monetary policy support is crucial for the Chinese economy in 2025, particularly in light of U.S. presidential candidate Donald Trump’s promise to impose high tariffs on Chinese goods. The PBOC had previously indicated that it could further reduce the reserve requirement ratio (RRR) by the end of 2024, releasing more cash for banks. The bank is now expected to implement this move in the first quarter of 2025, maintaining an important tool that could help alleviate the adverse effects of the new U.S. tariffs.

Additionally, PBOC committee members called for ample liquidity in the financial system and urged financial institutions to enhance credit extension. The panel also highlighted the need to improve the efficiency of fund utilization, strengthen the implementation of interest rate policies, and prevent funds from remaining idle or being used for arbitrage.