China’s central bank signalled continuity rather than a shift in direction in its latest monetary policy report, reiterating a strategy of “moderate easing” that combines fresh measures with the cumulative effect of existing tools. The People’s Bank of China (PBOC) said it will calibrate the intensity, pace and timing of interventions to support stable growth and a “reasonable” rebound in prices while maintaining ample liquidity in the banking system.
The report stresses closer monitoring of bank liquidity and money-market movements and a sustained effort to anchor short-term market rates around policy rates. In 2025 the central bank used a mix of operations to keep liquidity loose—public market operations injected a net 6 trillion yuan—and it has recently introduced a package of incremental measures to support high-quality growth at the start of 2026.
Monetary policy guidance is explicitly tilted toward credit allocation. The PBOC urged banks to sustain lending to priority areas: expanding domestic demand, technology innovation, small and micro enterprises, green projects and renovations. It also promoted refinements to re-lending for tech upgrades, stronger green-finance standards and support for orderly participation in the national carbon market.
Authorities are pushing to broaden and deepen direct financing channels. The report highlights faster growth in government bond issuance, corporate bond financing and onshore equity funding in 2025, and points to the launch of a “technology board” for bond issuance, which helped generate more than 1.5 trillion yuan of tech-innovation bonds last year. Regulators and market participants say these moves are meant to shift the financing mix from bank loans to bond and equity markets—better suited to high‑growth, R&D‑intensive firms.
Inflation dynamics are showing tentative improvement but remain subdued. Headline CPI rose 0.8% year‑on‑year in December 2025, the highest since March 2023, while core CPI excluding food and energy held at about 1.2% for several months. Producer prices are still negative year‑on‑year (‑1.9%) but the decline has narrowed and month‑on‑month readings have turned positive for three consecutive months, suggesting easing disinflationary pressure.
The report also confronts structural shifts in China’s financial system. Household and corporate deposit growth has slowed while wealth‑management and asset‑management products have expanded, prompting the PBOC to combine deposits and managed products when assessing overall liquidity. Experts cited in the report stress that large parts of these flows remain within the banking system and that an increased role for non‑bank financing reflects a maturing capital market rather than a deterioration of support to the real economy.
Policy initiatives extend beyond credit: the PBOC calls for deeper retirement‑finance markets, stronger financial support for consumption, targeted credit relief such as one‑off credit repair measures, and implementation of re‑lending for affordable housing. The emphasis is on directing resources to structural priorities—domestic consumption, technology upgrading and green transition—while avoiding broad, untargeted stimulus that could stoke financial imbalances.
For global markets, China’s blend of gentle easing and structural financial reforms matters because it affects demand for commodities, cross‑border capital flows and the pricing of global risk. Targeted measures to expand bond and equity financing may reduce banks’ share of credit intermediation over time, altering how external shocks to global funding conditions transmit into China. Investors should watch CPI momentum, the pace of direct‑financing growth and how quickly incremental measures translate into effective credit for new‑economy firms.