Does not intend to loosen monetary policy with measures such as interest rates, the central stated bank her China (PBOC) Although the economy has just recorded its worst month so far in 2025.
The People’s Bank of China has pledged to “thoroughly” implement its “average loose” monetary policy, while stressing the targeted support of the economy. These statements, included in a quarterly report published late on Friday (15.8.2025), followed shortly after the announcement of frustrating statistics showing the weakening of domestic demand.
Along with a message that sketches improved prospects for inflation, PBOC marks that it is likely to postpone the use of broad relaxation media, such as interest rates or compulsory reserves, for later in the year, when the economy is in danger of being more and more significant. The RRR index specifies the amount of cash that lenders must maintain as reserves.
“The emphasis on the implementation of existing policies and targeted relaxation marks a limited mood for broad monetary relaxation,” Goldman Sachs Group economists wrote in a report, including Chen Xinquan.
The Chinese economy suffered a decline in July, as the campaign to limit surplus production capacity in the domestic market has evolved the situation already created by the increase in duties. The incentives for infrastructure and consumption was also a key factor in deceleration, revealing the extent to which private demand remains weak.
However, after recording an annual increase of 5.3% of gross domestic product in the first half of 2025, China may possibly withstand a slower growth in the second half and achieve its official goal of about 5%.
“Structural policies could be a more important means of PBOC in the coming months compared to general interest rates or compulsory reserves,” Citigroup economists wrote, including Yu Xiangrong, in a report published on Sunday.
The economy faces a series of challenges, such as increasing trade barriers and inadequate domestic demand, but its foundations are stable and its resilience strong, PBOC said in its report.
In terms of deflation, a problem that has plagued China for more than two years, PBOC stressed that the basic consumer price index, which excludes volatile food and energy, has improved in recent months.
The suppression of the “unmistakable” competition of low prices by the government, coupled with a political shift towards stimulating consumption, will have a positive impact on inflation, PBOC said.
Economists generally expect PBOC proceeding a new interest rate reduction by 10 to 20 basis points by the end of the year, as well as a RRR reduction by 50 basis points.
Some analysts also expect the government to implement additional fiscal stimulation measures if the economy is later weakened this year. Citi provides for an almost 500 billion yuan ($ 70 billion) injection to support demand.
In addition, PBOC pledged to prevent unnecessary capital traffic in the financial system, expressing its concern about financial stability and arbitraz. This is another sign that “PBOC is not in a hurry to move on to wide relaxation,” according to a Goldman Sachs report published on Saturday (16.8.2025).
PBOC also revealed that in January it set up a committee of macrovascular supervision and financial stability, responding to the request of senior officials to reinforce its mission.
The Central Bank has expanded its field of action by contributing to the stabilization of real estate and stock markets in recent years, facilitating the creation of a quasi -stabilization fund for the purchase of shares earlier this year.