Structural interest rate cuts are also interest rate cuts! The central bank officially announced the first comprehensive reduction in interest rates for structural monetary policy tools.

Today, at a press conference held by the State Council Information Office, the People's Bank of China (PBOC) announced a 0.25 percentage point cut in the interest rates of structural monetary policy tools. This marks the first time the PBOC has comprehensively reduced interest rates for structural monetary policy tools. According to official PBOC data, as of the end of the first quarter of 2025, the balance of structural monetary policy tools stood at 5.9 trillion yuan, making them an important channel for the PBOC to inject base money into the economy.

Industry insiders told a reporter from Cailian Press that structural interest rate cuts are also interest rate cuts, which are conducive to strengthening the policy incentives for commercial banks. This 0.25 percentage point interest rate reduction will enhance policy incentives for commercial banks, encouraging them to increase credit lending to major strategies, key areas, and weak links.

Specifically, the PBOC also proposed comprehensive support for three key areas, including the establishment of 500 billion yuan in re-lending for service consumption and elderly care, increasing the re-lending quotas for technological innovation and technological transformation, and raising the re-lending quotas for supporting agriculture and small businesses. Industry insiders said that the new policy tools will stimulate the vitality of the service consumption and elderly care markets, and also support the accelerated and expanded implementation of the "program of large-scale equipment upgrades and consumer goods trade-ins", guiding financial institutions to accelerate loan disbursements in related fields and continuously advancing the development of technology finance.

First Comprehensive Cut in Interest Rates for Structural Monetary Policy Tools

At today's press conference, the PBOC announced a 0.25 percentage point cut in the interest rates of structural monetary policy tools, marking the first time the PBOC has comprehensively reduced interest rates for these tools.

The interest rates of structural monetary policy tools are the rates at which the PBOC provides re-lending to commercial banks. It is understood that this is the first time the PBOC has comprehensively reduced interest rates for various structural policy tools, including both long-term tools such as re-lending for supporting agriculture and small businesses, as well as phased tools such as carbon emission reduction support facilities, re-lending for technological innovation and technological transformation, re-lending for affordable housing, and re-lending for share repurchases and shareholding increases.

Specifically, PBOC Governor Pan Gongsheng stated that the PBOC plans to reduce the interest rates of structural monetary policy tools, including re-lending for supporting agriculture and small businesses, re-lending for technological innovation and technological transformation, carbon emission reduction support facilities, re-lending for share repurchases and shareholding increases, and re-lending for affordable housing, from the current 1.75% to 1.5%. Additionally, the interest rate for pledged supplementary lending (PSL) to policy financial institutions will be reduced from the current 2.25% to 2%.

"Structural interest rate cuts are also interest rate cuts, which are conducive to strengthening the policy incentives for commercial banks," a leading expert pointed out to a reporter from Cailian Press. This 0.25 percentage point interest rate reduction will enhance policy incentives for commercial banks, further leveraging the guiding role of structural monetary policy tools in driving commercial banks to increase credit lending to major strategies, key areas, and weak links.

Official data from the central bank showed that as of the end of the first quarter of 2025, the balance of structural monetary policy tools stood at 5.9 trillion yuan, making it an important channel for the central bank to inject base money.

Pan Gongsheng stated that in recent years, under the guidance of structural monetary policy tools, the credit allocation structure of financial institutions has undergone qualitative changes, significantly enhancing the intensity, adaptability, and precision of financial support for the real economy. As of the end of April, there were nine ongoing tools, focusing on key areas, major strategies, and weak links of the national economy, with an outstanding balance of approximately 5.9 trillion yuan, accounting for 13% of the People's Bank of China's balance sheet size, which is at a reasonable level.

"Lowering the interest rates of all structural monetary policy tools by 0.25 percentage points. Structural monetary policy tools generally refer to loans provided by the central bank to commercial banks. It is estimated that this could save banks approximately 15-20 billion yuan in funding costs annually, encouraging banks to increase their support for economic restructuring," Pan Gongsheng said.

Expansion of the "program of large-scale equipment upgrades and consumer goods trade-ins" policy, with increased support in three key areas

At the meeting, the central bank proposed three specific measures, including establishing a 500 billion yuan re-lending facility for service consumption and elderly care, increasing the quota for re-lending for technological innovation and technological transformation, and raising the quota for re-lending to support agriculture and small businesses.

Regarding the establishment of a 500 billion yuan re-lending facility for service consumption and elderly care, Pan Gongsheng stated that this tool is an innovative measure by the People's Bank of China to support and boost consumption. "To enhance and improve the supply of service consumption, the People's Bank of China has established a re-lending facility for service consumption and elderly care, which will encourage and guide financial institutions to increase financial support for key areas of service consumption, such as accommodation and catering, culture, sports, and entertainment, education, as well as the elderly care industry. It will also coordinate with fiscal and other industry policies to better meet the needs of the public for consumption upgrades," he said.

Industry insiders told a Caixin reporter that the new policy tools will stimulate the vitality of the service consumption and elderly care markets. "On the one hand, they can further unleash the potential of domestic service consumption, promoting the expansion of service consumption supply and boosting service consumption demand. On the other hand, they can support the development of the elderly care industry, which is also conducive to improving elderly care security and releasing residents' consumption potential over a longer period," they said.

The re-lending facility for service consumption and elderly care has been mentioned multiple times recently. The meeting of the Political Bureau of the Central Committee held on April 25th clearly stated the need to establish a re-lending facility for service consumption and elderly care. Recently, the central bank announced the official launch of the re-lending facility for service consumption and elderly care, encouraging and guiding financial institutions to increase financial support for key areas of the service consumption and elderly care industries.

Industry insiders pointed out that the new policy tools represent an expansion and upgrade of the previous special re-lending policy for inclusive elderly care.In April 2022, the People's Bank of China (PBOC) established a special re-lending facility for inclusive elderly care, with a quota of 40 billion yuan. Initially launched as a pilot program, it was later expanded nationwide. The new policy instrument features a larger quota, broader support areas, and lower interest rates, applicable nationwide. It represents an expansion and upgrade of the special re-lending facility for inclusive elderly care, reflecting the monetary policy's enhanced support for consumption, elderly care, and other sectors.

Meanwhile, the PBOC proposed increasing the quota for re-lending to support scientific and technological innovation and technological transformation from 500 billion yuan to 800 billion yuan, indicating intensified and expanded support for the "program of large-scale equipment upgrades and consumer goods trade-ins". Experts stated that increasing the re-lending quota would facilitate the implementation of the "program of large-scale equipment upgrades and consumer goods trade-ins" with enhanced support and broader coverage, guiding financial institutions to accelerate loan disbursements in relevant sectors and continuously advancing the development of fintech.

Additionally, the quota for re-lending to support agriculture and small businesses was increased by 300 billion yuan. Following this increase, the PBOC's re-lending quota for supporting agriculture and small businesses will reach 3 trillion yuan. Combined with the reduction in re-lending interest rates, this will create a synergistic effect of quantity and price, further supporting banks in expanding loan disbursements to agriculture-related sectors, small and micro enterprises, particularly small and medium-sized private enterprises.

"Re-lending to support agriculture and small businesses is a long-term tool used by the PBOC to support inclusive finance. Earlier this year, the PBOC merged the management of the two re-lending tools for supporting agriculture and small businesses and reformed the management approach to more efficiently incentivize and guide local legal-person financial institutions to increase credit support for agriculture-related sectors, small and micro enterprises, and private enterprises. This quota increase is the first since the reform and is expected to further enhance the support of re-lending to support agriculture and small businesses for the inclusive finance sector," said the aforementioned industry insider.