20 May 2025
Following the pro-growth stance denoted in the April Politburo meeting, the heads of the People’s Bank of China (PBoC), the National Financial Regulatory Administration (NFRA) and the China Securities Regulatory Commission (CSRC) held a press conference on 7 May to roll out financial market stabilisation measures (Table 1). The package, however, did not include direct fiscal support for domestic consumption, in line with our view that China will focus on implementing various fiscal easing already announced during the National People’s Congress in early March.
Numerous monetary easing measures were rolled out, including lowering the policy rate by 10bp, structural relending rates by 25bp (from 1.75% to 1.5%) and the Pledged Supplementary Lending rate by 25bp (from 2.25% to 2%). Liquidity injections included an outright 50bp cut in the required reserve ratio (equivalent to a RMB1trn liquidity injection) and creation of several new monetary policy tools. If fully utilised, the new tools add an additional RMB2.1trn of liquidity to the real economy. We think more easing will follow, likely through additional rate cuts in the second half of the year and the PBoC resuming treasury purchases from the secondary market.
The CSRC emphasised that market stability is critical to economic growth and the interests of investors, while pledging support for Central Huijin to play the important role as a market stabiliser. There has been a substantial change in policy stance towards the stock market since 24 September 2024, with ‘stock market (and housing) stabilisation’ written into this year’s target. Indeed, Central Huijin announced purchases of A-share ETFs in early April when the trade escalations shocked the market (Securities Times, 8 April); however, this is the first time the CSRC has referred to it as the quasi-market stabilisation fund.
The NFRA also announced that it would lower risk factors for insurance companies to increase equity exposure, encouraging more ‘patient capital’ to make stock investments.
The three ministries consistently pledged support for the real economy. The PBoC’s new monetary tools are aimed at directing new funds towards technology innovation, expanding elderly care and supporting small businesses. The CSRC is prioritising reforms to provide capital support for technology innovation, while enhancing investor protection to increase market reliability. And the NFRA is focusing on financing support for real estate developers, exporters and importers, and adapting regulations to help industrial transformation and upgrading.
Though not a focus of the press conference, we think reviving consumption remains the primary policy target this year. The Labour Day holiday showed improving activity, but we stay cautious as outcomes of tariff negotiations remain highly uncertain, while negative impacts may just be starting to unfold. A mix of both near-term measures, like trade-in programmes and services consumption subsidies, as well as structural measures, such as improved social safety net coverage, pension reforms and stabilisation of the housing sector, will likely be rolled out.
China and the US announced a tentative trade truce in Geneva on 12 May, agreeing to suspend new tariffs for 90 days and scale back existing tariffs (China to face 30%, the US to face 10%). Both sides agreed to establish a ‘consultation mechanism for trade and economic issues’, laying the groundwork for future high-level dialogue. The pullback will be most welcomed by businesses on both sides that were starting to feel the pinch from reciprocal tariffs and presents upside risks to economic growth.
Source: SCIO, HSBC
Source: LSEG Eikon
*Past performance is not an indication of future returns
Source: LSEG Eikon. As of 16 May 2025, market close
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