(Yicai) Jan. 16 -- The People’s Bank of China will cut relending and rediscount interest rates this month, Deputy Governor Zou Lan said while also signaling “some space” for further reductions in policy interest rates and bank reserve requirements this year.

The two structural interest rates will be lowered by 0.25 percentage point on Jan. 19 to guide financial institutions to boost support for major national strategic initiatives, key sectors, and weak areas of the economy, Zou said yesterday at the central bank’s first press conference of 2026.

Stabilizing economic growth and a reasonable recovery in prices are key considerations in formulating monetary policy, Zou said, reaffirming that the PBOC will maintain a moderately loose monetary policy while combining new and existing measures to foster a monetary and financial environment conducive to these goals.

China’s currency remains relatively stable, and with the US dollar already in a rate-cutting cycle, lowering interest rates is unlikely to place significant constraints on movements in the yuan, Zou noted.

Meanwhile, net interest margin at domestic banks has stayed at 1.42 percent for two consecutive quarters, he said, adding that with a large volume of long-term deposits maturing this year, bank funding costs are expected to fall further, helping stabilize margins and creating some room for lower benchmark interest rates.

Zou noted that the average statutory reserve requirement ratio  -- the amount of cash banks must hold in reserve -- stands at 6.3 percent, leaving scope for more cuts this year.

The central bank has at least 130 basis points of room for RRR cuts, and combined with the use of other quantitative tools, the space for reductions is expected to be relatively ample this year, said Ming Ming, chief economist at Citic Securities.

The PBOC also unveiled a slew of supportive measures, including lowering the minimum down payment ratio for commercial property to 30 percent from 50 percent to aid inventory reduction, setting up a special CNY1 trillion (USD143.5 billion) relending facility for private firms, raising relending quotas for tech innovation and transformation by up to CNY1.2 trillion, and raising relending quotas for agriculture as well as small and micro businesses by CNY500 billion.

The bank will continue to flexibly conduct treasury bond trading operations alongside other liquidity tools to ensure ample market liquidity and create favorable conditions for government bond issuance at a more reasonable cost, Zou said.

The finance ministry issued CNY16 trillion (USD2.3 billion) of government bonds last year, with the outstanding balance expected to have reached about CNY40 trillion at year-end. Among the main holders, banks had CNY27 trillion, non-bank financial institutions CNY5 trillion, and foreign institutions CNY2 trillion.

The PBOC has not yet disclosed the balance of government bonds it directly held at the close of 2026. As the end of September, it was CNY2.22 trillion.

Zou reiterated that China will continue to let the market play a decisive role in exchange rate formation and keep the yuan basically stable at a reasonable and balanced level, stressing that the country has no intention of gaining a competitive edge in international trade through currency devaluation.

Editors: Tang Shihua, Emmi Laine