BEIJING: China's central bank announced on Thursday cuts to some sector-specific interest rates to provide an early boost to the economy, and signalled it has room this year for further reductions in banks' cash reserve requirements and for broader rate cuts.
The People's Bank of China said it would lower interest rates on its structural monetary policy tools by 25 basis points on January 19.
Structural monetary policy tools are central bank instruments designed to target specific sectors or areas of the economy, such as sci-tech, green development and financial inclusion.
"The move is aimed at boosting support to major strategic areas and weak links in the economy," the central bank said in a statement following the announcement.
China's economic growth is expected to decelerate in 2026 compared to 2025 and maintain the same pace in 2027, according to a Reuters poll. The forecast underscores the pressure on policymakers to address structural vulnerabilities and deploy additional measures to sustain long-term growth.
China's yuan, eased right after the PBOC announcement, but quickly pared some of these losses.
"It looks like the PBOC is deploying a combination of tools except an outright policy rate cut," said Frances Cheung, head of FX and rates strategy at OCBC Bank.
The central bank said it would expand its re-lending programme for tech innovation by 400 billion yuan ($57.37 billion) to 1.2 trillion yuan, providing cheap loans to small and midsize tech companies.
Additionally, it would increase the lending quota for agricultural and small enterprises by 500 billion yuan. - Reuters
