Stimulus package unveiled to bolster support for growth

KUALA LUMPUR, 22 JULY 2026 —

China’s central bank cut key interest rates and freed up long-term liquidity on Wednesday, deploying a fresh financial stimulus package aimed at stabilising an economy facing tariff-related headwinds and soft domestic demand.

The People’s Bank of China reduced the seven-day reverse repo rate by 10 basis points to 1.4% effective Thursday, while trimming the reserve requirement ratio by 50 basis points. The liquidity injection is projected at about 1 trillion yuan ($138.5 billion).

Pan Gongsheng, the PBOC governor, said the measures target credit growth, investor confidence and capital-market resilience. Speaking at a press briefing, he detailed targeted cuts including a five-percentage-point reduction to zero for auto financiers and leasing companies, and a 25-basis-point decrease on housing provident fund mortgages.

The central bank also unveiled two new funding channels: one for services consumption and eldercare, and a second to support technology innovation via bond investments. Pan said the PBOC will provide capital to Central Huijin Investment if the state’s market-stabilising vehicle needs to increase shareholdings.

China’s A-share market reacted positively, with the Shanghai Composite Index up 0.8% at 3,342.67 on Wednesday.

Analysts said the package signals Beijing’s willingness to deploy additional tools if conditions deteriorate, including deeper rate cuts, broader fiscal easing and the possible formation of a formal stock-market stabilisation fund ahead of planned trade talks with the United States.

David Chao, global market strategist for Asia-Pacific (excluding Japan) at Invesco, said the combined measures should lower borrowing costs and revive credit expansion. “The package echoes last September’s response and shows policymakers remain committed to prioritising growth,” he said.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, expects further easing in the second half given subdued inflation and the complexity of ongoing trade negotiations. Zhang Jun, chief economist at China Galaxy Securities, said slicing the RRR to zero for some institutions removes an implicit floor on future reductions, opening room for a 50-basis-point cut to commercial banks’ RRR in the third quarter.

Lu Ting, chief China economist at Nomura, called for bolder fiscal steps—especially in property-debt resolution and pension reform—to support consumption. Li Yunze, head of the National Financial Regulatory Administration, separately pledged faster rollout of financing tools aligned with the country’s new real-estate development model.