(Yicai) Dec. 10 -- China’s top leadership has relaxed the country’s monetary policy stance for the first time in 14 years at a meeting of the Political Bureau of the Communist Party of China Central Committee.

The Politburo pledged to embrace a “moderately loose” monetary policy next year, shifting from the “prudent” stance followed since 2011, Xinhua News Agency reported yesterday. The top decision-making body also vowed a “more proactive” fiscal policy.

The last time monetary policy was moderately loose was in the 2008 to 2010 period after the global financial crisis. The change in stance will further open up the space for policy easing, according to analysts.

Xinhua also cited the meeting as saying the policy toolkit will be beefed up, unconventional counter-cyclical adjustments will be strengthened, policy coordination will be stepped up, and macro regulation will be more forward-looking, targeted, and effective. 

Since the Covid-19 pandemic in 2020, China's central bank has been using monetary policy tools to bolster the nation’s economic recovery, including lowering policy rates and the reserve requirement ratio.

This year, the People's Bank of China has cut the RRR twice by a total of 1 percentage point and slashed the one-year and five-year loan prime rates by a record 35 basis points and 60 bps to 3.1 percent and 3.6 percent, respectively.

Next year, the PBOC will likely cut the policy rates by 40 bps to 60 bps, trim the five-year LPR by 60 bps to 100 bps, and lower the RRR by 150 bps to 250 bps, according to Zhang Jun, chief economist of China Galaxy Securities.

The PBOC will go on paring the RRR and interest rates next year while stepping up its unconventional easing policies, such as purchasing government bonds and conducting outright reverse repurchase operations, said Ming Ming, chief economist at Citic Securities.

Editors: Dou Shicong, Futura Costaglione