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Banks (Finance)

People's Bank of China's Monetary Policy Adjustments in 2025

Strategic Insights

— 2 min read

The People's Bank of China has taken several significant steps in 2025 to adjust its monetary policy, aiming to stabilize the economy and promote financial support for key areas. The bank raised the macro-prudential adjustment parameter for cross-border financing and lowered the re-lending rate for supporting agriculture and small businesses. Additionally, the bank reduced the policy interest rate and adjusted the deposit reserve ratio of financial institutions and auto finance companies. These moves demonstrate the bank's commitment to implementing a more flexible monetary policy and providing support to vulnerable sectors.

Key Takeaways:

  • The People's Bank of China raised the macro-prudential adjustment parameter for cross-border financing from 1.5 to 1.75 on January 13, 2025.
  • The bank lowered the re-lending rate for supporting agriculture and small businesses by 0.25 percentage points on May 7, with interest rates for 3-month, 6-month, and 1-year refinancing rates at 1.2%, 1.4%, and 1.5% respectively.
  • The People's Bank of China decided to lower its refinancing rate by 0.25 percentage points on May 7, 2025.
  • The bank increased the re-lending quota for supporting agriculture and small businesses by 300 billion yuan on May 7, 2025.
  • The People's Bank of China reduced the policy interest rate by 0.1 percentage points on May 8, 2025, adjusting the 7-day reverse repurchase operation rate from 1.50% to 1.40%.
  • The People's Bank of China lowered the deposit reserve ratio of financial institutions by 0.5 percentage points (excluding financial institutions that have already implemented a 5% deposit reserve ratio) and lowered the deposit reserve ratio of auto finance companies and financial leasing companies by 5 percentage points on May 15, 2025.
  • The People's Bank of China authorized the National Interbank Funding Center to announce the loan market benchmark rate (LPR) on several occasions, with the one-year LPR reaching 3.0% on May 20, 2025.

Statistics:

  • The macro-prudential adjustment parameter for cross-border financing increased from 1.5 to 1.75 on January 13, 2025.
  • The interest rates for 3-month, 6-month, and 1-year refinancing rates for supporting agriculture and small businesses are 1.2%, 1.4%, and 1.5% respectively after the reduction by 0.25 percentage points on May 7, 2025.
  • The People's Bank of China increased the re-lending quota for supporting agriculture and small businesses by 300 billion yuan on May 7, 2025.
  • The policy interest rate was reduced by 0.1 percentage points on May 8, 2025, adjusting the 7-day reverse repurchase operation rate from 1.50% to 1.40%.
  • The People's Bank of China lowered the deposit reserve ratio of financial institutions and auto finance companies by 0.5 and 5 percentage points respectively on May 15, 2025.
  • The loan market benchmark rate (LPR) for one-year reached 3.0% on May 20, 2025.

Sources:

  • People's Bank of China
  • Aug. 15 -- People's Bank of China issued the following news release
  • People's Bank of China Re-lending Management Measures for Supporting Agriculture and Small Businesses
  • Guiding Opinions on Financial Support to Boost and Expand Consumption

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