China’s central bank announced yesterday cuts to sector-specific interest rates to provide an early boost to the economy, and signaled it has room this year for further reductions in banks' cash reserve requirements and for broader rate cuts.
The People's Bank of China said it would lower interest rates on its structural monetary policy tools by 0.25 percentage points on January 19 – a move that tends to have a limited impact on growth compared with cuts to benchmark policy rates.
Structural monetary policy tools are central bank instruments designed to target specific sectors or areas of the economy, such as small firms, tech innovation, and green development.
"The move is aimed at boosting support to major strategic areas and weak links in the economy,”the central bank said in a statement.
Zou Lan, Deputy Governor of PBOC, told a news conference that there is room for the central bank to cut interest rates and reserve requirement ratios this year. Meanwhile, authorities will lower the down payment for commercial property loans to as low as 30 percent to help the market destock, Zou said.
The central bank said it would also expand its re-lending program for tech innovation by 400 billion yuan (HK$447.25 billion) to 1.2 trillion yuan, providing cheap loans to small and midsize tech companies.
Separately, PBOC's data showed China's new bank loans totaled 16.27 trillion yuan in 2025, the lowest since 2018, much lower than the 18.09 trillion yuan in 2024.
Government stimulus measures appeared to gradually improve credit demand at year-end. Banks extended 910 billion yuan in new loans last month, up from 390 billion yuan in November and beating expectations, according to Reuters calculations based on PBOC data.
Furthermore, foreign exchange deposits rose to US$1.07 trillion (HK$8.35 trillion) at the end of last year, hitting the highest point since data became available in 2002, the data showed.
Staff reporter and Reuters
