The central bank: Promoting a reasonable rebound in prices is an important consideration in formulating monetary policy

    This year, under the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, more proactive macroeconomic policies have been implemented with greater urgency. Economic operations have remained stable with progress, key economic indicators have performed well, and the economy has demonstrated strong vitality and resilience. In the first half of the year, the gross domestic product (GDP) grew by 5.3% year-on-year, social confidence continued to be boosted, and new progress was made in pursuing high-quality development. Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the People's Bank of China has earnestly implemented the decisions and plans of the Party Central Committee and the State Council. It has maintained a moderately loose monetary policy, strengthened countercyclical adjustments, and comprehensively utilized various monetary policy tools to serve the high-quality development of the real economy, creating a suitable monetary and financial environment for sustained economic recovery and improvement.

    First, maintaining reasonable growth in money and credit. In May, the reserve requirement ratio was lowered by 0.5 percentage points, injecting approximately 1 trillion yuan of long-term liquidity into the market. The PBC also comprehensively utilized tools such as open market operations, medium-term lending facilities, and rediscounting to maintain ample liquidity. Financial institutions were guided to fully meet the effective credit demand of the real economy, improve capital utilization efficiency, and enhance the quality and effectiveness of services to the real economy. Second, efforts were made to reduce the overall cost of social financing. A market-oriented interest rate adjustment framework was improved. In May, the policy interest rate was lowered by 0.1 percentage points, the interest rate on structural monetary policy tools was reduced by 0.25 percentage points, and the interest rate on personal housing provident fund loans was cut by 0.25 percentage points. The implementation of interest rate policies was strengthened, driving down deposit and loan rates. Third, efforts were made to guide the adjustment and optimization of the credit structure. In May, we established a 500 billion yuan re-lending facility to support consumption and elderly care, increased the quota for re-lending to support technological innovation and technical transformation by 300 billion yuan, and created a risk-sharing tool for technological innovation bonds. These measures aim to bolster key areas of domestic demand such as consumption and technological innovation, implement existing structural monetary policy tools, and continue advancing the five major financial initiatives. Fourth, maintain basic exchange rate stability. We upheld the decisive role of the market in exchange rate formation, leveraged the exchange rate's regulatory function for the macroeconomy and international balance of payments, implemented comprehensive measures to stabilize expectations, and maintained basic stability of the RMB exchange rate amid complex conditions. Fifth, strengthen risk prevention and resolution. We steadily and orderly resolved financial risks in key areas and continuously improved the financial risk monitoring, assessment, and early warning system.

    The countercyclical adjustment of monetary policy has yielded noticeable results. Financial aggregates grew steadily, with the stock of social financing and broad money supply (M2) increasing by 8.9% and 8.3% year-on-year respectively at the end of June, while the balance of RMB loans reached 268.6 trillion yuan. Social financing costs remained low, with interest rates on new corporate loans and personal housing loans issued from January to June declining by approximately 45 and 60 basis points year-on-year respectively. Credit structure continued to improve, and the RMB exchange rate remained fundamentally stable at a reasonable and balanced level. The central parity rate of the RMB against the US dollar at the end of June was essentially unchanged from the end of last year.

    The current external environment has become more complex and challenging. Global economic growth momentum has weakened, trade barriers have increased, and economic performance among major economies has diverged. China's economic operation still faces numerous risks and challenges. At the same time, China's economy possesses a solid foundation, multiple advantages, strong resilience, and vast potential. The fundamental conditions and long-term positive trend supporting its development remain unchanged. We must maintain strategic resolve, focus our efforts on managing our own affairs, and drive major breakthroughs in strategic tasks crucial to the overall advancement of Chinese modernization. In the next phase, the People's Bank of China will adhere to Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era as its guide, fully implement the spirit of the Third Plenary Session of the 20th CPC Central Committee and the Central Economic Work Conference, uphold the general principle of pursuing progress while ensuring stability, and comprehensively implement the new development philosophy. We will resolutely follow the path of financial development with Chinese characteristics, further deepen financial reforms and high-level opening up, continuously promote high-quality financial development and the building of a financial powerhouse, accelerate the improvement of the central banking system, and further refine the monetary policy framework. We will balance the relationships between short-term and long-term objectives, between stabilizing growth and preventing risks, between internal and external equilibrium, and between supporting the real economy and maintaining the health of the banking system. We will enhance the foresight, precision, and effectiveness of macro-regulation, maintain policy continuity and stability, increase flexibility and predictability, strengthen the consistency of macro-policy orientations, and focus on stabilizing employment, enterprises, markets, and expectations. We will strive to achieve the annual economic and social development goals and tasks, and successfully conclude the 14th Five-Year Plan period.

    Implement and refine a moderately accommodative monetary policy. Based on domestic and international economic and financial conditions and financial market operations, carefully calibrate the intensity and pace of policy implementation. Maintain ample liquidity to ensure that growth in social financing and money supply aligns with economic growth and overall price level targets, continuously fostering a suitable financial environment. Prioritize promoting a reasonable rebound in prices as a key consideration in monetary policy implementation, striving to keep prices at a reasonable level. Further refine the interest rate adjustment framework, strengthen the guiding role of the central bank's policy rates, improve the market-based interest rate formation and transmission mechanism, leverage the market interest rate pricing self-discipline mechanism, and continuously enhance the implementation and supervision of interest rate policies. Reduce banks' funding costs and drive down the overall cost of social financing. Smooth the monetary policy transmission mechanism, improve capital utilization efficiency, prevent idle capital, and strike a balance between financial support for the real economy and maintaining the financial sector's own soundness. Fully leverage the dual functions of monetary policy tools in both aggregate and structural dimensions. Effectively utilize structural monetary policy tools to bolster support for technological innovation, stimulate consumption, assist small and micro enterprises, and stabilize foreign trade. We will adhere to a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, and uphold the decisive role of the market in exchange rate formation. We will enhance the resilience of the foreign exchange market, stabilize market expectations, resolutely correct procyclical market behavior, resolutely address actions that disrupt market order, resolutely guard against the risk of excessive exchange rate fluctuations, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. We will explore expanding the macroprudential and financial stability functions of the central bank, maintain financial market stability, and resolutely guard against systemic financial risks.