CHINA MONETARY POLICY REPORT Q4 2025

The following information was released by the People's Bank of China:

Executive Summary

The year 2025 marks the conclusion of the 14th Five-Year Plan period.Under the strong leadership of the CPCCentral Committee with Comrade Xi Jinping at its core, the national economy has developed steadily on a positive trajectory, and the major objectives of economic and social development have been achieved. The GDP grew 5 percent year on year in 2025. Following the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the People's Bank of China (PBOC) has earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council. It has pursued an appropriately accommodative monetary policy. While effectively leveraging existing monetary policies, the PBOC has unveiled a package of monetary and financial policies to strengthen counter-cyclical adjustments and effectivelysupportthesteady growth of the real economy and the stable performance of the financial market.

First,money and credit maintained reasonable growth. The PBOC kept liquidity adequate by using a mix of monetary policy tools, including the required reserve ratio (RRR) and open market operations (OMOs). Financial institutions were guided to build up project reserves and increase the credit supply to fully meet the effective credit demand from the real economy.Second, overall social financing costs were guided to move downward. The PBOC lowered policy interest rates, interest rates onstructural monetary policy tools, and interest rates onpersonal housing provident fund loans, effectively reducing overall social financing costs. The implementation and supervision of monetary policies were strengthened,and the self-regulatory mechanism for market-based interest rate pricingwas improved. Third,financial support for major strategies, key areas,and weak linkswas enhanced. The PBOCenrichedand refinedthe structural monetary policy toolkit, adjustedand improvedthe credit structure, and continued its efforts to develop technology finance, green finance, inclusive finance, old-age finance, and digital finance. The PBOC increasedcentral bank lendingforsci-tech innovation and technological upgrading as well as central bank lendingfor agriculture and small businesses, each by RMB300 billion. Italso createdRMB500 billion worth of central bank lendingfor service consumptionand elderly careand RMB200 billionworth of risk-sharing instruments for sci-tech innovation bonds.Fourth,the RMB exchange rate remained basically stable. Upholding the decisive role of the market in the formation of the exchange rate, the PBOC gave play to the role of the exchange rate in adjusting the macro economy and the balance of payments. It implemented a mix of policies to keep the RMB exchange rate basically stable at an adaptive and equilibrium level. Fifth,financial risks in key areas continued to subside. The PBOCestablished theMacroprudential and Financial Stability Committee to further improve macroprudential management and the financial stability guarantee system. Two monetary policy tools insupport of the capital market were refined, enabling Central Huijin Investment to play a role as a "quasi-stabilization fund." Steady progress was also made in addressing financial risks in key institutions and regions.

The appropriately accommodative monetary policy graduallytook effect in 2025.Financial aggregates grew rapidly. At year-end, outstanding aggregate financing to the real economy (AFRE) and broad money supply (M2) recorded year-on-year growth of 8.3percent and 8.5percent, respectively, notably higher than the nominal GDP growth rate.After accounting for the impact of localgovernmentdebt resolution, RMB loans grew by approximately 7percent, indicating continued strong credit support. Social financing costs declined further. In December,interest rates on new corporate loans and on new personal housing loans were both around 3.1percent. The credit structure continued to improve.At year-end, loans tothe technologysector, green initiatives, inclusive finance, the elderly care industry, and the digital economy sector witnessedyear-on-year growth of11.5percent, 20.2percent, 10.9percent, 50.5percent, and 14.1percent, respectively. All maintained double-digit growth, consistently outpacing overall loan growth. The RMB exchange rate remained basically stabledespite complex circumstances. At the end of 2025, the closing price of the RMB against the U.S. dollar stood at 6.9890 yuan, representing an appreciation of 4.4percentcompared to the end of 2024. The China Foreign Exchange Trade System (CFETS) RMB Exchange Rate Index was 97.99, a depreciation of 3.4percentfrom the end of 2024.

The impact of changes in the external environment has deepened, with insufficient momentum in global economic growth, an increase in trade barriers, diverging economic performance among the major economies, and uncertainties surrounding inflation trends and monetary policy adjustments.China's economy was generally stable and continued to make progress, with new achievements in high-quality development. However, challenges such as strong supply and weak demand persisted.At the same time, China's economy is underpinned by a solid foundation, multiple advantages, strong resilience, and vast potential. The conditions supporting long-term sound growth and the fundamental trajectory remain unchanged. It is essential to strengthen confidence, leverage strengths, address challenges, and continuously consolidate and expand momentum in the economy's steady and sound growth.Going forward, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBOC will fully implement the guiding principles of the 20th National Congress of the CPC and the plenary sessions of its Central Committee held thereafter as well as those of the Central Economic Work Conference. It will firmly grasp the primary task of high-quality development, and solidly advance Chinese modernization. It will adhere to the general principle of seeking progress while maintaining stability, and it willapply the new development philosophy fully and faithfully on all fronts. The PBOC will work to accelerate the creation of a new development paradigm, and it will give greater prominence to strengthening domestic economic circulation. Efforts willbe made to balance aggregate supply and demand, implement macroeconomic policiesthat are moreforward-looking, targeted, and coordinated, focus on expanding domestic demand and optimizing supply, improve the quality of incremental resourceswhile revitalizingexisting stock, and continuously consolidate and expand the momentum in the economy's steady and sound growth.Firmly following the path of financial development with Chinese characteristics, the PBOC will further deepen the financial reforms and the high-standard opening-up, and it will accelerate the pace of building China into a financial powerhouse. It will improve the central banking system,establisha well-conceived, prudentmonetary policy framework as well as a far-ranging macroprudential management system, and it will smooth the monetary policy transmission mechanism.The PBOC will work to strike a balance between short-term and long-term considerations, between supporting the real economy and maintaining the soundness of the banking system, andbetween internal and external equilibria. It will enhancethe consistency ofthe macro policy stance, effectively implement counter-cyclical and intertemporaladjustments, and improve the effectiveness of macroeconomic governanceso as to set the stage forthe 15th Five-Year Plan period.

The PBOC will continue to implement an appropriately accommodative monetary policy.Promoting stable economic growth and a reasonable rebound in prices will be key considerations for monetary policy. The intensity, pace, and timing of policy implementation willbe carefully calibrated in light of domestic and international economic and financial conditions as well as financial market performance.The PBOCwill employ a mix of policy tools, including the RRRand interest rate cuts,in a flexible and efficient manner to maintain ample liquidity and relatively accommodative financialconditions for the real economy. Itwill guide the reasonable growth in aggregateand balanced credit supply, ensuring that the growth of social financing and money supply is aligned with the projected targets for economic growth and general price levels.The PBOC will further improve the interest rate adjustment framework, strengthen the guiding role of central bank policy rates, and improve the market-based interest rate formation and transmission mechanism. It will leverage the self-regulatory mechanism for market-based interest rate pricing, strengthen implementation and oversight of interest rate policies, and work to reduce bank liability costs. With these efforts, it will promote a decline in overall financing costs. The coverage of clearly indicated comprehensive financing costs for corporate loans will be expanded in a well-regulated way.Giving play to the role of monetary policy tools in adjusting both the aggregate and the structure, the PBOC will make good use of structural monetary policy instruments, make solid efforts to develop technology finance, green finance, inclusive finance, old-age finance, and digital finance, and it will strengthen support for key areas, such as consumption expansion,sci-tech innovation,as well as inclusive financing for micro,small, and medium-sized enterprises (MSMEs). Pursuing a managed floating exchangerate regime based on market supply and demand with reference to a basket of currencies, the PBOC will maintain exchangerate flexibility, leverage the role of the exchange rate as an automatic stabilizer of the macro economy and the balance of payments, strengthen expectation guidance, prevent the risk of exchangerate overshooting, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level. The PBOC will expandand enrichits functions in macroprudential management and financial stability, enhancethe toolboxfor macroprudential and financial stability management,safeguard financial market stability,and firmly defend the bottom line whereby no systemic financial risks will occur.