Source: Wall Street Journal
On the afternoon of January 24th, the State Council Information Office held a press conference. Pan Gongsheng, Governor of the People's Bank of China, Zhu Hexin, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, and Xuan Changneng, Deputy Governor of the People's Bank of China, introduced the implementation of the Central Economic Work Conference's deployment and the high-quality development of financial services for the real economy, and answered questions from reporters.
Pan Gongsheng, Governor of the People's Bank of China, stated that with the approval of the central government, the People's Bank of China will establish a Credit Market Department to focus on the work related to the &#34;five major areas&#34;.
Pan Gongsheng stated that China's monetary policy has always adhered to the principle of putting ourselves first while taking into account both internal and external balance. By 2024, the spillover effect of monetary policies in developed economies will tend to decrease, and the difference in monetary policy cycles between China and the United States will converge. This change in the external environment objectively helps to enhance the autonomy of China's monetary policy operations and broaden the space for monetary policy.
Pan Gongsheng announced that China will lower the reserve requirement ratio for deposits by 0.5 percentage points on February 5th, providing the market with liquidity of 1 trillion yuan. Tomorrow (January 25th), the interest rates for re-lending and rediscounting for agriculture-related loans and loans to small and micro enterprises will be lowered by 0.25 percentage points, from 2% to 1.75%, and efforts will continue to stabilize and reduce the overall financing cost for society.
Pan Gongsheng revealed that the People's Bank of China and the China Banking and Insurance Regulatory Commission will jointly issue a document to improve the policy on operating property loans, support the development of real estate enterprises, expand the scope of fund utilization, and improve the liquidity situation of real estate enterprises. He stated that this policy will be announced today or tomorrow.
<h2>Pan Gongsheng: Maintain the flexibility of the RMB exchange rate and leverage the exchange rate as a stabilizer for macroeconomic and balance of payments</h2>
Pan Gongsheng stated that price stability takes into account both internal and external balance. In terms of interest rates, monetary policy operations are based on our own considerations.
The current price level still has some distance to go compared to the target of price expectations. Domestic banks have already moderately lowered deposit rates, and tomorrow, the interest rates for re-lending and rediscounting for agriculture-related loans and loans to small and micro enterprises will be lowered from 2% to 1.75%, in addition to the adjustment of the reserve requirement ratio mentioned above. All of these measures will help to push down the loan market quoted interest rate (LPR), which serves as the benchmark for loan pricing.
Regarding the exchange rate, it is important to maintain the flexibility of the RMB exchange rate and leverage the exchange rate as a stabilizer for macroeconomic and balance of payments. We adhere to the principle that the exchange rate is mainly determined by the market, while also maintaining a bottom line mindset and enriching response tools to prevent the formation of unilateral and self-reinforcing expectations, and to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
<h2>Pan Gongsheng: Maintain reasonable and ample liquidity in 2024</h2>
Pan Gongsheng stated that in 2024, in terms of overall quantity, a variety of monetary policy tools will be comprehensively used to maintain reasonable and ample liquidity, ensuring that the scale of social financing and money supply matches economic growth and price level expectations. In terms of pace, we will balance the issuance of new credit and enhance the stability of credit growth.
In terms of structure, we will continuously optimize the credit structure, increase financial support for private enterprises and small and micro enterprises, implement the 25 measures we recently announced to support the private economy, and improve the quality and effectiveness of financial services for the real economy. At the same time, we should focus on revitalizing the inefficiently used financial resources and improving the efficiency of the use of existing funds.
On the aspect of prices, we will take into account both internal and external balance, promote the stability and moderate reduction of comprehensive financing costs, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
<h2>Zhu Hexin: It is expected that the stability of China's cross-border capital flows will further improve by 2024</h2>
Zhu Hexin, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, stated that it is expected that the stability of China's cross-border capital flows will further improve by 2024, the current account will maintain a reasonable surplus, and foreign capital inflows under the capital account will become more active.
<h2>Pan Gongsheng: China's monetary policy always adheres to its own principles while taking into account internal and external balance</h2>
CNBC Reporter: I would like to ask if the Federal Reserve's decision not to raise interest rates this year will increase the room for the People's Bank of China to adjust its monetary policy? Thank you.
Pan Gongsheng, Governor of the People's Bank of China, said:
Thank you for your question. I watch CNBC every morning when I go to work, usually for about half an hour. There have been many discussions on CNBC recently about this issue, and many experts have discussed it on your TV station. I think this is a very good question. Currently, there is a lot of attention on the changes in the monetary policies of major central banks, including the Federal Reserve, in 2024, and we are continuously monitoring them.
We know that since the Federal Reserve started raising interest rates in March 2022, the policy rate in the United States has been raised by 525 basis points, reaching 5.25%-5.5%. The European Central Bank has also raised interest rates ten times in a row, raising the main refinancing rate from 0% to 4.5%. Therefore, currently, whether it is the United States or Europe, their interest rates are at a historically high level. At the same time, we have also seen that the impact of rapid interest rate hikes on the economic growth, inflation, and financial markets of developed economies is gradually emerging. There have been many discussions in the market, and it is generally expected that the Federal Reserve and the European Central Bank may cut interest rates in 2024. Overall, there are signs of a change in the direction of the Federal Reserve's monetary policy in 2024.
In the past year, we have also seen some fluctuations in the exchange rate of the US dollar, influenced by market expectations of US policy rates. The US dollar index reached a high of 114 in 2022, the highest level since 2002. Throughout 2023, it remained above 100, and recently hovered around 103. There is a strong correlation between the change in the US dollar index and the expectation of policy rates, so as the Federal Reserve ends its interest rate hikes, the market generally expects the momentum for the US dollar index to further strengthen to weaken.
What impact will the shift in the Federal Reserve's monetary policy have on China's monetary policy? China's monetary policy always adheres to its own principles while taking into account internal and external balance. In 2023, in the face of the spillover effects of monetary policies in developed economies, the People's Bank of China, based on domestic economic development, has lowered the policy interest rate twice and lowered the reserve requirement ratio twice, maintaining reasonable and abundant market liquidity, optimizing the credit structure, and providing strong support to the real economy. At the same time, the People's Bank of China and the State Administration of Foreign Exchange have stabilized market expectations through measures such as macro-prudential management based on the supply and demand in the foreign exchange market. Overall, the RMB exchange rate has maintained basic stability in a complex situation.
In general, the spillover effects of monetary policies in developed economies in 2024 will move towards reduced pressure, and the difference in monetary policy cycles between China and the United States will converge. Such changes in the external environment objectively help enhance the autonomy of China's monetary policy operations and expand the space for monetary policy operations.
(Continuously updating)

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Pan Gongsheng said that China will lower the reserve requirement ratio for deposits by 0.5 percentage points on February 5th, providing the market with liquidity of 1 trillion yuan. Tomorrow (January 25th), the interest rates for re-lending and rediscounting for agriculture and small businesses will be lowered by 0.25 percentage points, from 2% to 1.75%, and continue to promote the stability and moderate decline of the overall financing cost in society.

Cutting reserve requirements, "lowering interest rates", supporting real estate! The People's Bank of China has taken action.