China cuts key rate, reserve ratio to aid economy hit by tariffs

The latest steps aim to guide borrowing costs lower and are among the 10 measures outlined by Pan, which also include rate reductions on a slew of relending tools and and loans for policy banks. The RRR cut will release about 1 trillion yuan ($139 billion) in long-term liquidity, Pan said.

The offshore yuan erased gains to trade 0.1% weaker, while the 10-year government yield edged one basis point higher. The CSI 300 Index pared its 1.5% move higher at the open to around 0.5%.

Other measures announced by Pan:

-The reserve requirement ratio for auto financial companies and leasing firms will be cut to zero from 5%
-Rates on structural relending tools for commercial lenders and pledged supplementary lending for policy banks will each decline by 0.25 percentage point
-The housing provident fund loan rate will drop by 0.25 percentage point
-The quota for technology relending loans will increase by 300 billion yuan to 800 billion yuan to support equipment upgrading, a consumer goods trade-in program
-A 500-billion-yuan relending tool will be set up for services consumption and elderly care
-The allowance for the relending tool for agriculture, small and medium-sized enterprises will be expanded by 300 billion yuan
-Two stock market support tools with a total quota of 800 billion yuan will be combined
-A debt risk-sharing tool will be created allowing the PBOC to provide low-cost relending funds to encourage purchases of bonds of technology firms

“This isn’t just easing — it’s Beijing laying the groundwork for resilience, reform, and retaliation if needed,” said Charu Chanana, chief investment strategist for Saxo Markets in Singapore. “This isn’t just a boost for liquidity and credit — the focus on tech, consumption, and elderly care signals a broader push to support structural drivers of the economy.”

The decisions demonstrate policymakers are acting with urgency to support the world’s second-largest economy in the face of the US-China trade war. Expectations that Beijing would deploy more stimulus have risen after Trump brought US tariffs to a level economists say would decimate bilateral trade.

Pan reiterated that officials will implement a “moderately loose” monetary policy, which will translate into ample liquidity and ensure funding with relatively low financing cost. The RRR cut can enhance the stability of bank liabilities, he said.

The central bank last reduced its policy rate and the reserve requirement ratio in September after Pan unveiled an array of aggressive measures to put a floor under China’s growth slowdown.

The loosening of monetary policy is the latest sign of Beijing’s growing commitment to bolstering consumption.

China has pledged to shift to domestic demand to maintain growth, as Trump’s tariffs threaten to cripple trade with the US. Exports could well contract this year, after contributing to 40% of economic growth in the first quarter.

US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will travel later this week to Switzerland for trade talks with China led by Vice Premier He Lifeng. The plan was announced in statements Tuesday from the Chinese and US governments.

“The current timing window appears to be quite suitable indeed,” said Lynn Song, chief Greater China economist at ING Bank. “Trade talks with the US were announced and the cuts avoid looking like bending to tariff pressure, and the yuan has been on a strengthening trajectory.”

Speaking at the same briefing on Wednesday, the NFRA’s Li pledged to introduce a series of financing policies soon to help stabilize the property market, ease regulations on insurers’ investment in stocks to support the stabilization and revitalization of the capital market.

He also laid out a plan to launch a package of measures to boost funding for small and private companies. More banks will be allowed set up financial asset investment arms to increase investment in technology firms, Li added.

The steps taken by the PBOC mark a shift of direction after its priorities in recent months focused on defending the yuan and curbing speculation in the bond market instead of monetary loosening.

Without stronger stimulus, growth could begin to falter from the second quarter, putting China’s official goal of expanding around 5% this year at risk.

China’s top leaders pledged to “fully prepare” emergency plans to cope with rising external shocks in a Politburo meeting late April.

“Today’s announcement reflects an orchestrated effort to not only support liquidity, but to stimulate the broader market and economy,” said Frances Cheung, managing director and rates strategist at Oversea-Chinese Banking Corp Limited. “Having a more resilient economy would also be a card to play in the face of tariffs.”