The headquarters of the People's Bank of China in Beijing Photo: IC

China still has room for further cuts in its policy interest rates and the reserve requirement ratio (RRR) this year, China's deputy central bank governor said on Thursday.

Zou Lan, deputy governor of the People's Bank of China (PBC), made the remarks while responding to a media question on the central bank's new measures to support consumption and the central bank's monetary policy direction in 2026 at a press conference elaborating financial support for the the high-quality development of the real economy on Thursday.

In terms of the statutory deposit reserve requirement ratio, the current average level for commercial banks and other financial institutions stands at 6.3 percent. Zou hinted that there remains room for further interest rates and RRR cuts this year.

Regarding policy interest rates, external constraints are limited, as the yuan exchange rate remains relatively stable and the US dollar is in a rate-cutting cycle, meaning that exchange rate pressures are no longer a strong constraint on policy-making, Zou said.

Domestically, there have been signs of stabilization in banks' net interest margins since 2025. Moreover, a substantial volume of long-term deposits with maturities of three and five years is set to expire in 2026. The central bank's 0.25 percent reduction in interest rates for various structural monetary policy tools will help lower banks' interest payment costs, stabilize net interest margins, said the official.

The PBC announced plans to cut re-lending and re-discount interest rates by 0.25 percent starting January 19 in a bid to better leverage the incentive role of structural monetary policy tools and guide financial institutions to "increase support for major strategies, key areas, and weak links (of the economy)," according to a statement on the People's Bank of China website.

The PBC will also increase the quota of re-lending for tech innovation and transformation from 800 billion yuan ($114.72 billion) to 1.2 trillion yuan, and extend support to private small and medium-sized enterprises with higher R&D investment levels, according to Zou.

From January 5 to 6, the PBC held its 2026 work conference. At the meeting, the central bank vowed to continue to implement an appropriately accommodative monetary policy this year to provide strong financial support to achieve a successful start to the 15th Five-Year Plan (2026-30). 

In 2026, the central bank will flexibly and efficiently use various monetary policy tools, such as RRR cuts and interest rate cuts, to maintain ample liquidity in the market and nurture relatively accommodative social financing conditions.

Global Times