MNI INTERVIEW: PBOC To Ease In Tariff Response - BOC's Zong

The People’s Bank of China is likely to accelerate its easing pace, lowering banks’ reserve requirement ratios and interest rates as well as deploying targeted facilities, to mitigate the impact of heightened tariffs, while guiding lenders to support exporters and moving to stabilise stock markets, Bank of China Research Chief Zong Liang told MNI.

There is ample room for monetary easing, particularly in terms of reserve requirement cuts, Zong said in an interview, though he added that while the central bank will aim to respond flexibly to tariff pressures on the economy, it will preserve policy space for potential extreme scenarios.

Monetary easing would need to be coordinated with fiscal measures to boost credit demand, with authorities increasing incentives for consumption as well as investment in public welfare projects, he said. Businesses hardest hit by tariffs are expected to benefit from cheaper loans or repayment extensions, while companies exploring markets besides the U.S. will be supported by policies, according to Zong. (See MNI: Low Credit Demand Feeds PBOC Easing Caution; Tariffs Key)

However,  the risk of a deteriorated trade war with the U.S. might mean officials calibrate stimulus to avoid provoking systemic imbalances, and that they might tolerate GDP growth of slightly below the target of around 5%, he said.

STOCK MARKETS 

The PBOC could also expand and modify a relending facility introduced in October 2024 with the objective of funding stock buybacks, he said. While only about CNY70 billion of the CNY300 billion programme had been utilised by Feb 2025, according to Wind, it could get a bigger take-up by lowering its interest rate ceiling from 2.25% and extending loan terms to longer than three years from just one, Zong said. (See MNI:PBOC To Buoy Assets, As Stocks, Property Added To Mandate)

Additionally, eligibility criteria could be broadened to allow minority shareholders to participate in stock purchase programmes, he said. 

The PBOC likely continue to provide relending to the state-backed Central Huijin Investment company, part of the so-called “national team” working as a quasi-stabilisation fund to counteract any irrational fluctuations in equity markets, he said. 

The extreme external challenges have pushed China to accelerate key reforms, such as building up stability mechanisms for its stock market, Zong noted, pointing to rising allocation quotas for medium- to long-term capital, including insurance and pension funds, to invest in equities. Officials are also advancing institutional reforms, such as improving the quality of listed companies, to drive stock market development.