BEIJING, CHINA - MARCH 06: Pan Gongsheng, governor of the People's Bank of China, attends a new conference on economy for the third session of the 14th National People's Congress (NPC) on March 6, 2025 in Beijing, China.
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China's central bank and financial regulators announced sweeping plans on Wednesday to cut key interest rates in an effort to shore up growth in the face of trade worries.
China will cut the seven-day reverse repurchase rates by 10 basis points to 1.4% from 1.5%, the People's Bank of China Governor Pan Gongsheng said at a press briefing. That will bring down the loan prime rate, the main policy rate, by around 10 basis points, the governor said.
The central bank will also lower the reserve requirement ratio, which determines the amount of cash banks must hold in reserves, by 50 basis points, unleashing additional liquidity of 1000 billion yuan ($138.6 billion) to the market.
Pan was speaking along with officials from the National Financial Regulatory Administration and the China Securities Regulatory Commission.
The officials also announced measures to support financing for several key sectors, including technology and real estate, along with establishing of a 500-billion-yuan relending tool for consumption and elderly care.
The PBOC will reduce the mortgage rates under the nation's housing provident fund, a government-backed housing lender, by 25 basis points. Rates on five-year loans for first-time homebuyers will be trimmed to 2.6% from 2.85%, the governor said.
It will also gradually lower the amount of cash that auto financing firms must hold in reserves to zero from the current 5%.
China is preparing more measures to support small and medium enterprises and the private sector, which will be announced soon, Li Yunze, the head of the financial regulatory administration, said at the briefing.
The broad stimulus announcement showed the officials were acting with greater urgency to bolster the economy. Beijing had largely opted for piecemeal stimulus measures this year, while hinting that it had sufficient policy firepower to use "when appropriate."
"Policymakers are likely now privy to some of the early data on how the economy is being impacted by the tariff shock," said Lynn Song, chief economist for Greater China at ING, flagging that "there is [still] room for further policy easing," citing deflationary pressure and moderating growth.
He expects further 20 basis points of cuts in the interest rates and 50-basis-point reduction in the RRR this year, while noting "the next move may not come until after the Fed resumes its rate cuts."
The press conference took place hours after Beijing's affirmation that Chinese Vice Premier He Lifeng will hold talks with U.S. Treasury Secretary Scott Bessent in Switzerland later this week to discuss tariff and trade matters, in the latest sign that negotiations could begin between the two sides.
Those would be the first confirmed trade talks between the two countries since U.S. President Donald Trump ratcheted up tariffs on Chinese goods to an eye-watering 145%, prompting Beijing to retaliate with additional levies of 125% on imports from the U.S.
The planned talks could mark a turning point in ongoing trade war that has rattled markets and crippled trade between the world's two largest economies.
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