China’s monetary and financial authorities on Wednesday (May 7) unveiled a raft of supportive measures, including policy rate and reserve requirement ratio (RRR) cuts, as the country stepped up efforts to stabilise markets and sustain economic recovery amid external headwinds.

In one of its key policy actions, the People’s Bank of China (PBOC) announced an RRR cut of 0.5 percentage points for eligible financial institutions from May 15. Notably, the RRR for auto financing and financial leasing companies will be slashed from five per cent to 0 per cent.

Central Bank Governor Pan Gongsheng told a press conference that this move is expected to provide the financial market with roughly ¥1 trillion (about US$138.9 billion) in long-term liquidity.

PBOC on Wednesday also announced its decision to cut the rate for seven-day reverse repos by 0.1 percentage points starting Thursday to better implement the moderately loose monetary policy and enhance support for the real economy.

Pan said this policy rate reduction is expected to result in the loan prime rate (LPR), a market-based benchmark lending rate, dropping by 0.1 percentage points.

More financial support, meanwhile, will be given to sectors including tech innovation, service consumption and elderly care via relending—with relending rates lowered by 0.25 percentage points from Wednesday, the central bank said.

These announcements followed a high-level meeting of Chinese policymakers in late April that called for faster implementation of more proactive and effective macro policies, ample liquidity and stronger support for the real economy, after an encouraging 5.4 per cent GDP expansion witnessed in the first quarter of 2025.

“The foundation for China’s sustained economic recovery needs to be further consolidated, and the country faces an increasing impact from external shocks,” said the meeting of the Political Bureau of the Communist Party of China Central Committee.

Pan said Wednesday’s policy decisions will steadily lower overall social financing costs, boost market confidence, and effectively support stable expansion of the real economy.

CAPITAL MARKET BOOST

Also speaking to the press, Wu Qing, head of the China Securities Regulatory Commission (CSRC), pledged efforts to keep capital markets stable and active, noting that the commission will help listed companies affected by tariffs cope with challenges.

Relevant authorities will support listed companies in using various financing instruments such as equities, bonds and real estate investment trusts (REITs) to conduct direct financing, and encourage eligible domestic enterprises to pursue overseas listings in compliance with laws and regulations, Wu told the media.

Financial institutions and tech firms, as well as private equity and venture capital firms, will be allowed to issue technological innovation bonds, with funds raised in this manner earmarked for investment and financing in the innovation sector, according to a statement jointly released by the PBOC and the CSRC on Wednesday.

To further bolster the capital market, the central bank said it will combine the quotas of its two monetary policy tools to make them more convenient and flexible — thereby strengthening the inherent stability of the capital market.

The Securities, Funds and Insurance companies Swap Facility (SFISF), with an initial scale of ¥500 billion, and the ¥300 billion relending facility that supports stock buybacks and shareholding increases, will be operated under a shared quota of ¥800 billion from Wednesday onwards.

At the same press conference, Li Yunze, head of the National Financial Regulatory Administration, said the administration will continue to expand the pilot programme for long-term investment by insurance funds.
An additional ¥60 billion in quotas is expected to be approved in the near term, injecting fresh liquidity into the market, Li revealed.

“We have solid economic fundamentals, sound macro policies, and reliable institutional guarantees, all injecting much-needed certainty into China’s economy and capital markets amid global uncertainties,” Wu said.

PROPERTY MARKET CONSOLIDATION

Chinese authorities will also expedite the rollout of a series of financing systems aligned with the new development model of its property sector, reinforcing efforts to stabilise the property market, Li said at the media conference.

Loans approved for China’s “white list” real estate projects have reached ¥6.7 trillion, which facilitated the construction and delivery of over 16 million homes, significantly stemming the property sector downturn and restoring market stability, Li said.

An official survey covering 70 major Chinese cities showed that commercial home prices in March this year had risen in more cities compared with a month earlier, as transactions in the real estate market revealed greater vibrancy.

To consolidate this trend, PBOC said it will lower interest rates on personal housing provident fund loans by 0.25 percentage points starting Thursday.

This adjustment is expected to save homeowners more than ¥20 billion per year in terms of interest payments, thus supporting the rigid demands of Chinese households, Pan told the press.