PBOC Pledges to Maintain Easing Amid Supply-Demand Gap

Key Facts

In its third-quarter monetary policy report, published on November 11, the People’s Bank of China said it would step up financial support for the economy, citing an imbalance between strong supply and weak demand that is weighing on activity. The bank said the economy also faces structural imbalances and external shocks, and that the external environment has become more complex and volatile. It said it would strengthen countercyclical adjustments, expand domestic demand and improve supply in pursuit of its annual development targets. It also pledged to keep overall borrowing costs low and maintain the yuan’s stability at a reasonable and balanced level.

Among its financing priorities, the bank pledged to strengthen financial support for domestic demand, scientific and technological innovation, and infrastructure projects. The approach aims to direct credit to areas identified by the bank as part of its efforts to support the economy, while addressing the weak demand cited in the report. The September package expanded the scope of the pledged supplementary lending facility to include the “six networks,” according to Yicai Global. These include water infrastructure, new power grids, computing, next-generation telecommunications, urban underground utility networks and logistics. Adding these areas places infrastructure among the targeted support channels unveiled by the bank in September.

China’s National Bureau of Statistics said gross domestic product grew 4.6% year on year in the first three quarters of 2026. Quarterly growth slowed from 5.0% in the first quarter to 4.3% in the second quarter, then reached 4.5% in the third quarter. China’s leadership is targeting growth of between 4.5% and 5% for all of 2026, according to The Associated Press. The bank’s pledge to stimulate domestic demand and improve supply comes in the context of that target, amid an official diagnosis of imbalances between the two sides of the economy. An economist at Natixis also described the September package as a targeted approach to lowering financing costs and supporting selected sectors through policy banks and the property sector.

These policy directions coincide with strong growth in foreign trade in October, as Chinese exports rose 35.2% year on year and imports increased 41.6%, according to data reported by The Associated Press. The trade surplus reached $1.04 trillion in the period from January to October 2026. But the monthly surplus narrowed in October to $105.3 billion, compared with $133.5 billion in September. An economist at Moody’s Analytics said he expects exports to remain strong for the rest of the year, driven by electronics and automobiles. The bank also pledged to enrich its policy toolkit and maintain stability in the stock, bond and foreign exchange markets, according to Reuters.