Global Times: China's financial markets show strong resilience; nation has ample policy room to tackle external challenges: expert

BEIJING, May 12, 2025 /PRNewswire/ -- China's financial markets have held steady, with the benchmark Shanghai Composite Index rising back above 3,300 in May amid active trading.

Both the onshore and offshore yuan have appreciated slightly - by around 1 percent - against the US dollar since the end of last year, now stabilizing around the 7.2 mark. Meanwhile, growing confidence in the economy has helped the bond market recovery, with the yield on 10-year government bonds stabilizing around 1.65 percent.

Following the rollout of a package of financial policies on Wednesday, the People's Bank of China (PBC) reaffirmed on Friday its commitment to maintaining a moderately accommodative monetary policy. The central bank said it will actively implement the financial policy package introduced in May and emphasized efforts to maintain market stability and firmly safeguard against systemic financial risks.

Policy support

Despite growing external headwinds, China's financial markets have demonstrated strong resilience and capacity to absorb shocks, supported by a series of policy tools. At the same time, the country still has ample policy space, with sufficient tools and time to respond to potential external challenges, and support high-quality growth, experts said on Sunday.

At a closely watched press conference on Wednesday, Chinese officials unveiled a comprehensive package of financial policies, ranging from cuts to the reserve requirement ratio (RRR) and interest rates, to the creation of new policy tools; from increased credit support for service consumption and elderly care, to a series of banking and insurance measures aimed at supporting foreign trade.

This time, the RRR and interest rate cuts - both key tools of monetary policy - were implemented simultaneously. The RRR was reduced by 0.5 percentage points for financial institutions from May 15, which is expected to inject approximately 1 trillion yuan ($138.9 billion) in long-term liquidity to the market, Pan Gongsheng, governor of the central bank, announced at the press conference. 

The PBC will also lower the rate for the seven-day reverse repos by 0.1 percentage points starting Thursday. Pan said the policy rate reduction is anticipated to bring down the loan prime rate (LPR), a market-based benchmark lending rate, by 0.1 percentage points.

The new policies sent a positive signal to the market, with the offshore yuan briefly strengthening to 7.19 per dollar before settling at 7.2291 on Wednesday, according to an analysis provided to the Global Times by DBS Bank.

In the stock market, the Shanghai Composite Index briefly fell below 3,100 on April 7 after the US announced reciprocal tariffs, but quickly rebounded and closed at 3,342 on Friday.

Wu Qing, chairman of the China Securities Regulatory Commission, told the press conference that in the face of an unexpected and severe test, relevant Chinese authorities acted swiftly by implementing a package of stabilizing measures that combined policy, funding, and expectations-based tools. 

Following what was essentially just a single day of sharp volatility, the A-share market rapidly rebounded, regained stability, and continued to improve - demonstrating notable resilience and a strong capacity to withstand risks, according to Wu.

The financial policy mix is anticipated to bolster market confidence, invigorate market participants, stabilize credit conditions, and enhance the sustainability of financial support for the real economy, Wen Bin, chief economist at China Minsheng Bank, told the Global Times on Thursday.

It will play a vital role in achieving the full-year growth target and China still possesses room for further enhancement, Wen said.

Sufficient space

Despite a notable rise in external uncertainties and instabilities, China's economy is underpinned by solid fundamentals, numerous structural strengths, and considerable untapped potential. With ample macro policy tools and sufficient policy space, the country is well-positioned to further unleash its vast domestic demand, Wen noted.

For instance, the PBC said on Friday that with a solid foundation already in place, there is still considerable scope to boost financial support for consumption. The central bank pledged to introduce a comprehensive set of financial measures to support consumption and is working on a guiding document to further enhance financial support for consumer spending.

A recent key meeting of the Political Bureau of the Communist Party of China Central Committee emphasized the need to stabilize employment, businesses, markets and expectations, using the certainty of high-quality development to counter the uncertainties arising from rapid changes in the external environment.

In the first quarter, China's GDP expanded by 5.4 percent year-on-year, marking a solid start to the year. 

"The country will implement more proactive and effective macro policies and is confident in achieving its around 5 percent growth target for 2025," China's Finance Minister Lan Fo'an said at the 58th Annual Meeting of the Board of Governors of the Asian Development Bank, according to the Ministry of Finance on Tuesday.

China has been both a beneficiary and a contributor to economic globalization, accounting for around 30 percent of global economic growth in recent years, Lan said, noting that the country will continue to build a unified national market, expand high-standard opening-up, and share the opportunities and benefits of its development with the world.

Currently, the international economic and trade landscape remains complex and challenging. China is actively fulfilling its responsibilities as a major country by upholding multilateralism and strengthening communication and cooperation with neighboring countries, the EU, and other regions, Wen said.

In the short term, these initiatives help mitigate the risks associated with a decline in exports to the US. In the longer term, China's comprehensive industrial chain advantages and strong international competitiveness will continue to underpin stable cross-border capital flows through resilient export performance, Wen observed.

Despite rising global economic risks, international capital continues to invest in China at a steady pace.

China's five core strengths - a comprehensive domestic industrial system and supply chain, global leadership in decarbonization, advances in smart manufacturing, a vast talent pool, and a proactive approach to globalization - have laid a solid foundation for industrial upgrading, according to an April report by Morgan Stanley.

The report further highlighted China's steadily growing scientific and technological capabilities as often-overlooked strengths, stating that "in emerging and frontier industries, we expect China to play a leading role."

https://www.globaltimes.cn/page/202505/1333796.shtml