China's central bank is maintaining an appropriately accommodative monetary policy to support steady economic growth and keep financing costs for businesses at historically low levels, according to the People's Bank of China (PBOC) following its fourth quarterly Monetary Policy Committee meeting of 2025.

The PBOC emphasized the continued use of counter-cyclical and structural policy tools to balance economic stability with growth, ensuring liquidity remains adequate and the money supply aligns with economic expansion and expected price levels. This approach aims to sustain low borrowing costs for companies while maintaining overall financial market stability.

1. Financing Environment and Capital Markets:

• Loan prime rate reforms and market-oriented deposit rate adjustments have strengthened the monetary policy transmission mechanism.

• Financing costs for enterprises remain historically low, supporting investment and operational expansion.

• The central bank is monitoring bond markets and long-term yields to smooth capital allocation and improve efficiency.

2. Exchange Rate and Foreign Capital Flows:

• The RMB remains stable and adaptive, with adequate foreign exchange reserves and a balanced supply-demand environment.

• The PBOC is focused on mitigating exchange rate volatility, providing predictability for cross-border trade and investment.

3. Support for Private Enterprises and Key Sectors:

• Large banks are encouraged to lead in financing the real economy, while smaller banks focus on core business and targeted support.

• Policy support is prioritized for sectors such as domestic demand expansion, science and technology innovation, SMEs, green finance, inclusive finance, and digital finance.

• Facilities like the Securities, Funds and Insurance Companies Swap Facility (SFISF) and central bank lending for stock buybacks help maintain capital market stability.

4. Policy Implementation and Flexibility:

• The PBOC will adjust policy intensity and pace based on domestic and international economic conditions.

• Monetary policy tools are being leveraged in a synergistic and flexible manner, balancing aggregate economic needs with structural objectives.

5. Strategic Implications for Foreign Investors:

• Stable financing costs and a predictable RMB exchange rate create favorable conditions for cross-border investment and trade.

• Access to targeted financing and structured policy support provides opportunities in high-tech, green, and SME sectors.

• Monitoring PBOC’s policy adjustments can inform hedging strategies, currency risk management, and long-term capital allocation.

Overall, China's monetary policy in late 2025 reflects a focus on stable economic growth, efficient capital allocation, and predictable financial conditions, offering international businesses a clearer environment for investment, trade financing, and risk management.