China's renewed monetary policy easing - still incremental but more pre-emptive

China’s central bank, securities regulator and finance regulators held a joint press briefing on 7 May 2025 to announce a few new monetary policy easings.

The details are as follows:

Policy tools Detailed policy measures
Benchmark rates
  • 10 basis points (bps) benchmark rate cut (7-day reverse repo rate from 1.5% to 1.4%)
  • 50bps reserve requirement ratio (RRR) cut; additional cut of RRR from 5% to 0% for auto finance companies
  • 25bps rate cuts to provident fund housing loans; 25bps cut for structural monetary policy tools
Relending quotas Aggregate increase of RMB1.1trillion relending quota including RMB300bn for small businesses, RMB300bn for tech and innovation and RMB500bn for services consumption and elderly care
Calibrate earlier policy tools to support equity market Combine 2 liquidity facilities for supporting the equity markets with RMB800bn quota (RMB105 has been utilised)
Regulatory policies
  • People’s Bank of China (PBOC) to support Huijin to increase index fund holding
  • Support banks to set up investment firms for tech sector
  • Support Chinese firms listed overseas to come back to China
  • Support listed firms affected by tariffs

This policy move resembles the September 2024 policy pivot, when a series of initiatives were introduced to stabilise growth. 

The timing of the policy announcement follows the April Politburo meeting which pledged to roll out more proactive easing to mitigate the downside risks of trade wars. Therefore, it is not surprising that today’s announcement coincides with reports that China plans to engage in trade talks with the US aimed at de-escalation. This suggests that these policies are pre-emptive measures to stabilise market sentiment, particularly those focusing on supporting the equity markets.

The scale of the easing is incremental. Instead of deploying aggressive easing measures, the policymakers remain cautious in their approach to stimulus. Additional fiscal easing or stronger property easing policies are notably not included, potentially reserved for a larger shock if it occurs.

With this policy setting, the policymakers are adopting a “wait-and-see” approach to assess the impact of tariff wars and their effect on domestic sentiment. The aim is to provide consistent, incremental easing to stabilise growth and prevent any renewed slowdown, although it may not be a comprehensive policy package to trigger outsized upside growth potential yet.