The People's Bank of China has recently released its "China Monetary Policy Execution Report for the First Quarter of 2026" (hereinafter referred to as the "Report"). The Report indicates that since the beginning of this year, the national economy has started strongly, with key indicators surpassing expectations, demonstrating robust resilience and vitality. In the first quarter, the gross domestic product (GDP) grew by 5% year-on-year. The People's Bank of China will continue to implement a moderately accommodative monetary policy, leverage the integrated effects of existing and incremental policies, strengthen counter-cyclical and cross-cyclical adjustments, and create a suitable monetary and financial environment for sustained and high-quality economic development.
In the view of industry experts, the optimistic assessment of economic trends, combined with the removal of the phrase "flexibly and efficiently using reserve requirement ratio cuts and interest rate cuts," will further support market expectations that monetary policy is entering an observation period.
Regarding the main direction for monetary policy in the next phase, the Report proposes continuing to implement a moderately accommodative monetary policy. It emphasizes enhancing the foresight, flexibility, and targeting of policies, adjusting the intensity, pace, and timing of policy implementation based on domestic and international economic and financial conditions as well as financial market operations, strengthening coordination between monetary and fiscal policies, improving the transmission mechanism of monetary policy, and promoting stable economic growth and a reasonable recovery in price levels. The Report advocates flexibly utilizing various monetary policy tools to maintain ample liquidity and relatively accommodative social financing conditions, guiding reasonable growth in financial aggregates and balanced credit issuance, ensuring that the scale of social financing and money supply growth align with economic growth and the expected targets for overall price levels.
Compared with the fourth quarter of 2025, the Report on monetary policy has added phrases such as "enhancing the foresight, flexibility, and targeting of policies" and "strengthening coordination between monetary and fiscal policies," while removing the reference to "reserve requirement ratio cuts and interest rate cuts."
Wu Zewei, a special researcher at a commercial bank, stated, "The removal of the specific reference to 'reserve requirement ratio cuts and interest rate cuts' primarily indicates a shift in the focus of monetary policy from aggregate tools to structural tools, rather than a change in the accommodative stance. The 5% economic growth achieved in the first quarter, with fundamentals exceeding expectations, provides room for the central bank to moderately scale back references to aggregate tools, avoiding the continuous release of strong stimulus signals that could lead to market expectations of unilateral easing. At the same time, external imported inflationary pressures and uncertainties in the monetary policies of major economies create a complex external environment that constrains the use of aggregate tools."
In this regard, the Report notes that the impact of changes in the external environment is deepening, with weak momentum in global economic growth, persistent geopolitical risks, emerging supply shocks and imported inflationary pressures, divergent economic performances among major economies, and uncertainties in the monetary policy adjustments of central banks worldwide.
Wu Zewei further explained that the Report's emphasis on flexibly utilizing various tools essentially anchors policy operations to situational assessments, maintaining reasonably ample liquidity by ensuring aggregate stability and enhancing the transmission efficiency of existing tools. This reflects a prudent approach aimed at achieving a higher level of dynamic balance between stabilizing growth and preventing risks.
Xiong Yuan, chief economist at a securities firm, also believes that the removal of the reference to "reserve requirement ratio cuts and interest rate cuts" indicates a reduced likelihood of such measures in the short term. On one hand, liquidity in the interbank market is currently ample, making reserve requirement ratio cuts less necessary. On the other hand, in terms of interest rate cuts, strong export resilience and fiscal stimulus measures are supporting the economy, reducing the necessity for rate cuts. Structural monetary policy tools will become the focus of policy at this stage.
The Report also points out the importance of leveraging the dual functions of monetary policy tools—aggregate and structural—making good use of various structural monetary policy tools, optimizing tool management, solidly advancing the "Five Major Financial Tasks," and strengthening financial support for key areas such as expanding domestic demand, technological innovation, and small and medium-sized enterprises.
Bai Wenxi, deputy chairman of the China Enterprise Capital Alliance, stated that strengthening financial support for key areas such as expanding domestic demand, technological innovation, and small and medium-sized enterprises signifies a deepening of monetary policy from "aggregate easing" to "targeted support."
Wu Zewei also noted that this reflects the precise application of monetary policy. This approach places structural tools at the forefront, aiming to break through transmission bottlenecks where liquidity accumulates within the financial system. Financial support for expanding domestic demand focuses on consolidating the foundation of domestic circulation in consumption and investment. Comprehensive credit services for technological innovation aim to cultivate new productive forces as a strategic pivot, while targeted support for small and medium-sized enterprises specifically alleviates long-standing financing constraints faced by microeconomic entities.
"This targeted support approach indicates that, within the clear framework of a moderately accommodative direction, structural tools have become the core policy instrument for driving economic progress and facilitating the transition between old and new growth drivers," Wu Zewei added.
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