As China faces pressure from an economic slowdown in the second half, it unveiled an easing policy vision that spans liquidity and foreign exchange. The core measures include resuming the Central Bank's trading of Government Bonds and strengthening opening-up through enhancing foreign-exchange convenience. As consumption and investment have recently slowed, deepening the slump in domestic demand, the move specifies within the financial institutional sector the tone of the 15th Five-Year Plan (2026–2030), approved at the recent Fourth Plenary Session of the 20th Central Committee.
On the 28th, according to Chinese business outlets Caixin and China Business News, Pan Gongsheng, governor of the People's Bank of China (PBOC), Li Yunze, Director General of the National Financial Regulatory Administration, Wu Qing, chair of the China Securities Regulatory Commission, and Zhu Hexin, Director General of the State Administration of Foreign Exchange (SAFE), gathered at the "2025 Financial Street Forum," which opened the previous day, to present policy directions to support the real economy.
Looking at China's economic indicators this year, growth was solid in the first quarter, and even after it began a tariff war with the United States in April, it maintained growth in the 5% range in the second quarter, exceeding market expectations. But in the third quarter, the growth rate fell below the government's 5% target, showing a marked slowdown. The main reason was that consumption and investment failed to recover. As a result, attention turned to whether additional stimulus would be introduced to defend against a decline in fourth-quarter growth. Against this backdrop, the recently concluded Fourth Plenary Session passed a five-year development plan centered on "high-quality development" and "technological self-reliance."
◇ PBOC resumes Government Bonds trading after 10 months
Accordingly, the forum the previous day announced stimulus across institutional sectors of the real economy. First, the People's Bank of China, the Central Bank, will resume trading of Government Bonds, which had been suspended for 10 months. Earlier in January, the PBOC said demand exceeded supply in the Government Bonds market and announced a temporary halt to purchases. Since then, yields (interest rates) on Chinese Government Bonds have fallen to record lows amid a bond rally, while the yuan has come under depreciation pressure over the same period.
Governor Pan said, "This measure is to strengthen policy coordination between currency and fiscal policy. Taking into comprehensive account demand and the supply-demand dynamics of bonds, we will supply liquidity over the short and long term," adding that the bank will implement a "moderately accommodative" monetary policy.
Ming Ming, chief economist at China International Capital Corporation, said, "Since the start of this year, the issuance of Government Bonds and local government bonds has increased markedly. In an environment where expansionary fiscal policy continues to play a role along with the use of remaining year-end quotas for local government bonds, the Central Bank's resumption of Government Bonds trading will effectively align with fiscal-side stimulus and help the stable operation of interest rates in the bond market."
◇ Nine foreign-exchange policies to raise the level of opening-up coming soon
In the foreign-exchange institutional sector, nine new policies targeting trade facilitation and innovation will be announced soon. They are expected to include expanding pilot programs for high-level opening in foreign trade, optimizing foreign-exchange settlement for new trade formats, and easing regulations on advances on behalf of others in services trade. The financial authorities' rationale for such support is that amid this year's slump in domestic demand, "exports" have propped up China's economy, and China is pursuing "yuan internationalization" to challenge the dollar's dominance.
In fact, China's external trade and foreign-exchange transactions are becoming more active. China Business News, citing World Bank data, said, "From 2019 to 2024, the total value of world trade grew an average of 5.4% per year, 4.6 percentage points higher than in the previous five years. Even amid complex conditions this year, global trade has continued relatively rapid growth," adding, "Reforms and opening in the foreign-exchange field, an important element of China's opening-up, have also achieved clear results."
According to the report, in 2024 the trading volume of China's foreign-exchange market increased 37% compared with 2020, and in the first to third quarters of this year, China's balance of payments (total cross-border receipts and payments, excluding banks) reached $11.6 trillion (about 16,643 trillion won), a record high. Director General Li Yunze said, "Resolutely deepening reform and expanding opening are key means to strengthen the driving force and vitality of financial development," adding, "We will advance financial opening to broader and deeper areas."
On this, China Business News assessed, "The policy mix announced at the forum focused on managing market volatility and shaping expectations in the short term, lowering and stabilizing financing costs and promoting capital formation in new industries in the medium term, and improving the efficiency of an open financial system in the long term."