China's Central Bank Vows to Maintain Eased Monetary Policy, Keep Yuan Stable

The People's Bank of China on Thursday issued its latest stance on the next phase of monetary policy, explicitly stating it will continue to implement a moderately eased monetary policy and step up counter-cyclical adjustments. The central bank also reiterated its commitment to keeping the yuan exchange rate basically stable at a reasonable and balanced level, guarding against the risk of excessive exchange rate fluctuations.

**Policy Tone: Eased but Not "Flooding"**

Central bank officials emphasized that injecting liquidity into the economy is not "the more, the better," indicating policymakers remain cautious about large-scale monetary easing. According to an article in the People's Daily, the central bank pledged to better utilize existing loans and prevent funds from sitting idle within the banking system. This stance aligns with recent data showing a slowdown in bank lending, suggesting the threshold for policy rate cuts remains high in the near term, with stabilizing the yuan exchange rate still a priority.

**Rates and Credit: Lowering Comprehensive Financing Costs**

On the rates front, the central bank proposed deepening the market-based interest rate pricing self-discipline mechanism, lowering comprehensive financing costs for enterprises, and promoting low-level operation of social comprehensive financing costs. Market sources indicate that the interest rate on newly issued corporate loans in June was approximately 3.0%, about 20 basis points lower than the same period last year; the rate on newly issued individual housing loans was approximately 3.1%, roughly flat year-on-year. Credit allocation continues to optimize, with growth rates for technology loans, green loans, and inclusive loans all exceeding the overall loan growth rate.

**Exchange Rate Stance: Balancing Flexibility and Stability**

On the exchange rate front, the central bank stated it will maintain exchange rate flexibility, leverage the exchange rate's role as an automatic stabilizer for macroeconomic and balance-of-payments adjustments, enhance foreign exchange market resilience, stabilize market expectations, and guard against the risk of excessive exchange rate fluctuations. As of press time, the USD/offshore yuan was trading near 6.71662. Earlier data showed that at the end of June, the yuan's closing rate against the U.S. dollar stood at 6.7852, appreciating approximately 3% from the end of the previous year.