The People's Bank of China is Reducing Structural Interest Rates.

The People's Bank of China to Cut Interest Rates

The Vice Governor of the People's Bank of China, Zou Lan, made significant statements at a press conference in Beijing. The bank plans to reduce the one-year interest rate for various refinancing facilities from 1.5% to 1.25%. This move aims to encourage banks to lend to companies in various sectors.

Credit Program for Private Companies

The central bank will establish a new refinancing program for private companies and increase the quotas for credits provided for technology innovation. These developments are expected to positively impact market dynamics.

Interest Margins and Policy Cuts

Zou emphasized that the improvement in banks' interest margins has created room for reducing policy interest rates, though he did not present a clear timeline on this matter. Previously, the PBOC had only made a 10 basis point cut in the policy interest rate as of 2025.

Additional Support for Small Businesses

The PBOC plans to provide an additional 500 billion yuan in resources targeted at small businesses and the agricultural sector by expanding existing credit support. This new funding could enhance market liquidity and stimulate economic growth.

Open Market Operations and Liquidity Management

Finally, Zou announced that the PBOC would gradually increase the buying and selling of government bonds in open market operations to maintain sufficient liquidity. Additionally, he stated that the monetary authority would publish detailed documents regarding policies to be implemented soon.