China's financial sector intensifies efforts to stabilise economy

The transformation of the monetary policy framework has also accelerated.

China’s financial industry has intensified its efforts to stabilise the economy and advance key initiatives in technology finance, green finance, inclusive finance, pension finance, and digital finance, according to a report by the Bank of China (BOC) Research Institute.

The transformation of the monetary policy framework has accelerated, marked by a combination of structural monetary policies, policy rate reductions, and improvements to the rate regulation mechanism. The People’s Bank of China has employed new tools for liquidity management, including the purchase and sale of ChinaBond Government Bonds.

BOC highlighted growth in green and inclusive finance, driven by technological innovation. Concurrently, corporate financing costs continued to decline, whilst more banks have reduced deposit rates. The renminbi exchange rate also showed signs of appreciation.

Carbon market trading activity also saw a rise, but challenges remain, such as a declining level of prosperity in China's economy, and adjustments of the real estate market. Monetary data has also weakened, and stock market volatility intensified due to external pressures, a slowing economy, adjustments in the real estate market, and weak residential borrowing demand.

BOC emphasised the need to strengthen monetary policies to support economic recovery and achieve the 5% GDP growth target. 

It added that, under the backdrop of potential US Federal Reserve rate cuts, the narrowing of the China-US interest rate spread and the appreciation of the renminbi provide opportunities for tailored monetary policy adjustments.

However, the report also noted that a significant rebound in financial data is unlikely due to weak financing demand in the real economy and a lack of market confidence and expectations.