The People’s Bank of China has signalled that it will maintain a “moderately loose” monetary stance while keeping room for further cuts to reserve requirements and interest rates, a posture that is quietly reshaping domestic markets. In its fourth-quarter 2025 monetary policy report the central bank highlighted steady growth in financial aggregates — year‑end social financing and M2 rose by 8.3% and 8.5% respectively — and said it will deploy tools such as RRR cuts and rate adjustments flexibly to keep liquidity ample and financing conditions supportive.
That benign liquidity backdrop is coinciding with a flurry of market activity. Domestic private fund managers reached a record 122 firms managing at least RMB 10 billion as of late January, while heavyweight individual investors ploughed large sums into company placements such as the RMB 1 billion apiece subscriptions to JAC Motors’ rights issue. At the same time some stocks are showing signs of speculative excess: a handful of small-cap names have seen dramatic rallies and regulatory scrutiny or trading halts have followed in several cases.
The policy tilt is arriving as industry-level shifts accelerate, most conspicuously in semiconductors and storage. Memory prices have been rising sharply, prompting suppliers and buyers to reassess supply chains and investment plans. Domestic chipmaker SMIC reported improved revenue and profit in Q4 2025, and a wave of M&A, capacity expansion and targeted fund-raising across materials, packaging and testing suggests the industry is repositioning in response to both cyclical recovery and longer-run strategic priorities.
Beyond finance and chips, Beijing is rolling out demand-side support that could create durable market opportunities. Five ministries published guidance setting a 2027 target of at least 90% mobile communications coverage for public low-altitude air routes, an infrastructure push intended to underpin drone operations, urban air mobility and other low-altitude services. Telecom operators, equipment makers and specialised integrators are already lining up projects, and the move dovetails with state interest in building domestic capabilities in sensors, navigation and communications.
Global context is also relevant. While the Dow Jones extended records on the same trading days, big US tech names have shown mixed performance and Alphabet’s decision to issue exceptionally long-dated debt to fund AI spending underscores how companies worldwide are racing to finance large-scale technology strategies. Cross-border capital flows are visible in China too: foreign-owned quant managers and insurers are among recent entrants into the RMB 10 billion private fund tier, signalling growing comfort among overseas and institutional investors with China’s evolving asset-management scene.
Risks are evident. Low rates and abundant liquidity can prop up economic growth but also foster mispricing: regulators are already chasing errant share-price behaviour and warning accounting firms. For policymakers the challenge will be to sustain credit support that channels into productivity-enhancing investment — chip fabrication, telecom build-out, and advanced manufacturing — while containing speculative excess in small-cap equities and overheated pockets of property or commodity trading.