China's PBOC Cuts RRR by 0.5 ppt, Lowers Repo Rate to 1.4%, Earmarks 800 Billion Yuan for Market and Tech Support

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Updated May 7, 2025, 01:51 AM

China's central bank, the People's Bank of China (PBOC), along with the securities regulator and the national financial regulatory administration, held a press conference on May 7 to announce a comprehensive financial policy package aimed at stabilizing the market and managing expectations amid economic challenges. PBOC Governor Pan Gongsheng detailed several key measures, including a 0.5 percentage point cut in the reserve requirement ratio (RRR), which will release approximately 1 trillion yuan ($138 billion) in liquidity into the financial system. The central bank also reduced the 7-day reverse repo rate by 0.1 percentage points to 1.4% from 1.5%, effective May 8, and lowered structural policy tool rates by 0.25 percentage points to support technological innovation, small and medium enterprises, and green sectors. Additionally, housing provident fund loan rates were cut by 0.25 percentage points, with the rate for first-home loans over five years lowered from 2.85% to 2.60%. The PBOC plans to increase the total quota of two monetary policy tools to 800 billion yuan to support capital markets and announced 500 billion yuan in relending loans targeted at elderly care and service consumption, along with 300 billion yuan to boost tech lending. The China Securities Regulatory Commission (CSRC) pledged to consolidate positive momentum in capital markets, promote long-term capital inflows, support mergers and acquisitions among listed companies, and maintain steady financing for the property market. The authorities emphasized their commitment to safeguarding financial market stability, maintaining healthy stock market development, and managing external shocks, including the impact of U.S. tariffs on export-heavy A-share companies. These measures come as part of China's broader efforts to provide accommodative monetary policy and enhance liquidity to support economic growth and market confidence.

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