China’s Central Bank Pledges More Support, Broader Domestic Demand and Improved Supply
Key Facts
The People’s Bank of China pledged on November 11 to intensify countercyclical adjustments, expand domestic demand and improve supply in pursuit of its annual development targets, according to the third-quarter monetary policy report, key points of which were reported by Reuters. The bank said it would continue to implement a moderately accommodative monetary policy, adjusting policy tools in a timely manner. The message comes as the bank described the imbalance between strong supply and weak demand as one of the challenges facing the economy. It also cited structural imbalances and external shocks, saying the external environment had become more complex and volatile. The bank identified domestic demand, scientific and technological innovation, and infrastructure projects as areas for increased financial support.
The bank said accommodative policy would continue, with overall borrowing costs kept low and the yuan’s exchange rate basically stable at a reasonable and balanced level, according to Reuters. The approach combines support for economic activity and financing for areas selected by the bank with efforts to maintain currency and market stability. Reuters’ report did not provide figures for the amount of financing allocated or a timetable for distributing it across the targeted areas. The bank also pledged to expand its policy toolkit and safeguard stability in stock, bond and foreign exchange markets. This places market stability among its stated priorities alongside expanding domestic demand.
October data showed mixed signals on prices and activity. The consumer price index rose 0.7% year on year, while food prices fell 2.9%, according to China’s National Bureau of Statistics. Across the first ten months, the consumer price index rose an average of 0.9% year on year. On industrial prices, the producer price index rose 5.7% year on year and 0.7% month on month in October. Prices of production materials increased 7.4% year on year, while consumer goods prices fell 0.1%.
Production and new orders indexes fell to 49.8% and 49.4%, respectively. A senior statistician at the bureau said the decline was linked to some demand being brought forward ahead of the October holiday and to a more complex international environment, and that supply and demand in the sector had slowed. The reading is consistent with the bank’s diagnosis of weak demand and structural imbalances, without changing the fact that it pledged to continue providing support. The divergence between price data and activity indexes shows that policy challenges involve different economic trends at the same time.
By contrast, gross domestic product grew 4.6% year on year in the first nine months of 2026, reaching about 107.11 trillion yuan, according to National Bureau of Statistics data published through the Chinese government. Third-quarter growth exceeded the 4.4% forecast in a Reuters poll. But Reuters noted that growth during the year had relied on exports, alongside weak domestic demand and rising trade tensions with the European Union. In financing data through the end of September, outstanding aggregate social financing rose 7.1% year on year and broad money supply grew 7.2%, according to People’s Bank of China data published through the government. These indicators provide context for the bank’s pledge to direct support toward domestic demand while maintaining an accommodative policy.
Chinese customs data showed exports rose 35.2% year on year in October and imports increased 41.6%, while the trade surplus was $105.3 billion, compared with $133.5 billion in September, according to the Associated Press. In a report published on November 12, The Wall Street Journal said the bank had renewed its commitment to a growth-supportive, accommodative policy while pointing to the risks of cutting interest rates to very low levels. The South China Morning Post also reported that the bank’s report had removed a reference to planning additional measures that appeared in an earlier report, and that analysts saw the annual policy meeting in December as a potential window for new stimulus measures. According to FX Blue’s economic calendar, new yuan loans data for October were scheduled for release on November 13, with a forecast of 80 billion yuan against a previous reading of 1,080 billion yuan in September. These figures remain a forecast and a previous reading, while the bank also pledged to expand its policy toolkit and safeguard stability in stock, bond and foreign exchange markets.