China eases monetary policy to boost economic growth

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China’s central bank and financial regulatory bodies announced today, May 7, a broad set of monetary policy measures aimed at bolstering economic growth, amid rising concerns over the impact of the ongoing trade tensions with the United States.

In a press conference, Governor of the People’s Bank of China (PBC), Pan Gongsheng, stated that the seven-day reverse repo rate would be cut by 10 basis points (bps), from 1.5% to 1.4%, and loan interest rates would also be lowered by around 10 bps.

The required reserve ratio (RRR) — the amount of cash banks must hold as reserves — will be reduced by 50 bps, allowing an additional 1 trillion yuan (approximately $138.6 billion) in liquidity to flow into the market.

According to the official Xinhua News Agency, the new lower interest rates will take effect starting May 8, while the reduced RRR will come into force on May 15.

Additionally, the central bank plans to cut the mortgage interest rate under the Housing Provident Fund (HPF) — a government-backed mortgage lender — by 25 bps. The interest rate on five-year loans for first-time homebuyers will be lowered from 2.85% to 2.6%.

Beyond this, officials announced further measures to support financing in sectors such as technology and real estate, including the creation of a 500-billion-yuan re-lending facility aimed at boosting consumption and elderly care services.

Gradually, the cash reserve requirement for auto financing companies will be reduced to zero, down from the current 5%.

“Additional measures to support small and medium-sized enterprises (SMEs) are in the pipeline and will be announced in the near future,” Li Yunze, Party Secretary and Minister of the National Financial Regulatory Administration (NFRA) stated during the briefing.