The People's Bank of China has outlined its monetary policy approach for the second half of the year.
At a press conference on July 15, Zou Lan, a spokesperson and Deputy Governor of the PBOC, stated that the central bank will continue to implement an appropriately accommodative monetary policy.
The PBOC will intensify both counter-cyclical and cross-cyclical adjustments based on domestic and international economic and financial conditions, aiming to expand domestic demand, optimize supply, strengthen endogenous economic growth drivers, and consolidate the positive economic momentum.
Zou Lan reported that monetary policy has effectively supported the real economy in the first half of the year, with reasonable growth in financial aggregates.
By the end of June, the broad money supply (M2) grew by 8.0% year-on-year, and the outstanding social financing stock increased by 7.4%. New yuan loans in H1 totaled 10.72 trillion yuan.
The overall social financing cost remains at historically low levels, and the credit structure continues to improve.
Asset Management Product Growth
Yan Xiandong, Director-General of the PBOC's Survey and Statistics Department, noted that the scale of asset management products has maintained high growth this year.
By the end of June, total assets under management (AUM) for these products reached 124.8 trillion yuan, a year-on-year increase of 12.7%, with a net increase of 4.6 trillion yuan from the beginning of the year.
This includes 34.8 trillion yuan in bank wealth management products, 42.9 trillion yuan in public funds, 25.3 trillion yuan in asset management trusts, and 21.8 trillion yuan in combined products from insurance, securities, fund, futures, and financial asset investment companies.
In terms of funding sources, fundraising from non-financial enterprises grew rapidly, while the household sector remained the primary source of incremental funds.
Funds raised from non-financial enterprises grew 24.7% year-on-year by end-June, with growth exceeding 20% for four consecutive months, and the balance increased by 331.9 billion yuan from the start of the year.
Funds raised from the household sector grew 7.7% year-on-year, with the balance increasing by 1.1 trillion yuan.
Regarding asset allocation, growth in underlying assets diverged, with bonds showing a notably higher year-on-year increase.
By end-June, asset management products held a total of 28.5 trillion yuan in interbank deposits and certificates of deposit, up 10% year-on-year.
They held 38.2 trillion yuan in bonds, an increase of 8.4% year-on-year, with growth accelerating sequentially; the balance rose by 2.2 trillion yuan from the start of the year.
Holdings of stocks amounted to 9.5 trillion yuan, up 26.2% year-on-year.
Monetary Policy Implementation Details
Deputy Governor Zou Lan detailed the central bank's policy implementation in the first half.
The PBOC has maintained ample liquidity in the banking system using a combination of tools including reverse repos, medium-term lending facilities (MLF), and government bond trading.
To enhance the precision and effectiveness of short-term interest rate management, an overnight reverse repo operation was added to the open market operations toolkit at the end of June, and the interest rate corridor for temporary repos was narrowed from 70 basis points to 50 basis points.
The PBOC also created an overseas central bank repo facility to facilitate RMB liquidity management and bond asset allocation for foreign central banks.
Efforts to keep overall social financing costs low included a 0.25 percentage point cut in the interest rates for structural monetary policy tools at the beginning of the year.
Financial support for key areas was strengthened through measures like increasing quotas for re-lending facilities supporting tech innovation, agricultural sectors, and small businesses, and establishing a dedicated 1 trillion yuan re-lending facility for private enterprises.
The PBOC also maintained stable financial market operations, keeping the RMB exchange rate fundamentally stable at an adaptive and equilibrium level, and continued tools to support capital market stability.
Key Financial Data Highlights
Financial data for the first half shows the effectiveness of monetary policy in supporting the real economy.
Financial aggregates grew reasonably, with M2 growth and social financing stock growth both exceeding nominal GDP growth.
The overall social financing cost is at a historical low. In June, the weighted average interest rate for newly issued corporate loans was around 3.0%, approximately 20 basis points lower than the same period last year.
The rate for new personal housing loans was around 3.1%, broadly flat year-on-year.
The credit structure continued to optimize, with outstanding loans to micro and small businesses, medium- to long-term industrial loans, and medium- to long-term loans to the services sector (excluding real estate) all growing faster than total loans.
Financial markets operated smoothly, with the 10-year government bond yield around 1.73% and the RMB exchange rate stable with an appreciation trend.
Interest Rate Mechanism Reforms
In response to questions about interest rate mechanism reforms announced at the Lujiazui Forum, Zou Lan explained two key measures.
The first involves optimizing the mechanism for temporary repos, including adjusting the operation rate corridor to a symmetrical 50-basis-point band around the policy rate, clarifying trigger conditions, and moving the operation window earlier to better align with market trading habits.
The second measure is the addition of an overnight reverse repo operation to the regular open market toolkit to better match institutions' short-term liquidity needs, especially during periods of high volatility like month-end.
These measures aim to enhance the precision of the PBOC's liquidity management and short-term rate control.
Structural Policy Tools and Future Direction
Xie Guangqi, Director-General of the Monetary Policy Department, discussed the use of structural monetary policy tools.
These tools provide market-based incentives for financial institutions to optimize credit structure. Key measures this year included establishing the 1 trillion yuan private enterprise re-lending facility and increasing quotas for tech innovation re-lending.
The private enterprise re-lending facility has seen strong uptake, with its balance exceeding 760 billion yuan, effectively guiding lower lending rates to small and medium private firms.
The tech innovation re-lending facility, with a total quota of 1.2 trillion yuan, has supported loans for technological upgrades and equipment renewal.
Moving forward, the PBOC will continue to leverage these tools to guide credit towards key sectors.
Global Context and Exchange Rate Outlook
Regarding the global environment, Zou Lan noted that geopolitical conflicts have pushed up international energy prices, leading to elevated global inflation and policy adjustments by some major central banks.
Despite uncertainties, the RMB exchange rate has remained generally stable with two-way fluctuations, reflecting market supply and demand and confidence in China's macroeconomic fundamentals.
The PBOC will continue to implement an appropriately accommodative monetary policy and let the market play a decisive role in exchange rate formation, keeping the RMB rate basically stable at an adaptive and equilibrium level.
Social Financing and Credit Trends
Yan Xiandong presented data on social financing and money supply.
By the end of June, the outstanding social financing stock was 462.06 trillion yuan, up 7.4% year-on-year. The M2 balance was 356.71 trillion yuan, up 8.0%. Outstanding RMB loans stood at 282.63 trillion yuan, up 5.2%.
Corporate direct financing, including bonds and equities, increased significantly and accounted for a larger share of total social financing.
Credit support to the real economy remained strong, with loans flowing to key areas and weaker links.
Xie Guangqi commented on the trend of slowing loan growth and rising bond financing, suggesting it may be a long-term shift reflecting economic restructuring and financial system adaptation.
He advised observing combined loan and bond data and focusing on comprehensive indicators like interest rates and financing structure.
Second Half Policy Stance
For the second half of the year, Zou Lan reiterated that the PBOC will implement an appropriately accommodative monetary policy with enhanced foresight, flexibility, and targeted measures.
The central bank will utilize its rich toolkit, including reserve requirement ratios, open market operations, and MLF, to maintain ample liquidity and guide the growth of social financing and money supply in line with economic and price targets.
On interest rates, the PBOC will guide rates based on macroeconomic performance, price trends, and policy needs to keep overall financing costs low.
Structural monetary policy tools will continue to play a key role in optimizing credit structure and supporting key sectors.
Lending Rates and Offshore Market Development
On lending rates, Yan Xiandong noted that new corporate loan rates continued to decline in June, with the weighted average rate around 3%. Rates for key industries like manufacturing also fell.
New personal housing loan rates remained low at around 3.1%, contributing to a decline in outstanding mortgage rates.
Regarding offshore RMB market development, Xie Guangqi outlined several areas of focus: ensuring ample and stable offshore RMB liquidity, enriching the offshore RMB asset pool, activating trading of offshore RMB financial products, and improving offshore financial infrastructure.
He highlighted the recent pilot in the Shanghai Free Trade Zone allowing selected banks to conduct RMB foreign exchange transactions directly with overseas entities, which has received positive market feedback.
Panda Bond Market
On the Panda bond market, Zou Lan reported robust growth, with issuance exceeding 160 billion yuan in the first half of 2026, a 69% year-on-year increase.
Cumulative issuance has surpassed 13 trillion yuan, with issuers from 24 countries and regions.
The market is attracting more international issuers, including foreign governments and multinational corporations, and is recognized by both domestic and foreign investors.
The PBOC will continue to facilitate the high-quality development of the Panda bond market.
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