The People’s Bank of China said in a report published Thursday that it will adjust the pace and intensity of its policymaking based on economic and financial conditions at home and abroad.
China’s central bank has signaled potential policy changes to meet growing external challenges, pledging to keep supporting the yuan as trade frictions weigh on the currency.
In a quarterly report, the People’s Bank of China said it will adjust the pace and intensity of its policymaking based on economic and financial conditions at home and abroad. It vowed to closely monitor monetary policy shifts by major global central banks.
The report, published Thursday, comes as China’s economy and the yuan are under increasing pressure from higher tariffs imposed by President Trump’s administration. So far, the central bank has refrained from depreciating the currency to support struggling exporters.
Under the first Trump administration, Beijing devalued the yuan to counter the impact of tariffs, leading to China being designated a “currency manipulator” by the U.S. Treasury.
Reiterating its commitment to currency stability, the central bank said in the report that it would keep the yuan “basically stable at a reasonable and balanced level,” while addressing market-disrupting actions and preventing excessive exchange-rate fluctuations.
The PBOC was “vocal” on yuan stability, Citi Research analysts Xiangrong Yu and Xinyu Ji said in a note. That could be useful in the context of potential U.S.-China trade negotiations as some currency stability could be what both sides want, they said.
On the domestic economy front, the Chinese central bank pledged to conduct open market operations flexibly and use a mix of monetary tools–including interest rates and reserve requirements for lenders–to maintain ample liquidity.
It also vowed to revitalize unsold housing and idle land to help stabilize the property market, which remains the biggest drag on the world’s second-largest economy.
The PBOC’s pledge to intensify monetary easing when appropriate, depending on economic and market conditions, and its strong language on FX management suggest that it is prioritizing financial stability over immediate monetary policy easing, Goldman Sachs economists said in a note.
While they continue to expect two 50-basis-point cuts to reserve requirement ratios in the first and third quarters, and two 20-basis-point policy rate cuts in the second and fourth quarters, there is a risk that the PBOC will rely on low-profile instruments like repo operations and skip high-profile measures.
“FX stability may take priority and constrains the PBOC’s ability to cut policy rates in the near term as tariff uncertainties remain significant,” Andrew Tilton and others said in a note.
That said, they think high-profile monetary policy easing is necessary given China’s persistent deflationary pressures.
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