On February 14th, an article in the Shanghai Stock Exchange reported that the recent reduction in the central bank’s balance sheet has raised concerns in the market about tightening monetary policy. According to the balance sheet of the monetary authority disclosed by the central bank, as of the end of 2024, the total assets and total liabilities of the People’s Bank of China reached 44.05 trillion yuan, a decrease of about 1.6 trillion yuan from the end of 2023, and the scale of balance sheet reduction for the whole year reached a new high in recent years. Experts say that the central bank’s reduction in balance sheet does not mean a tightening of monetary policy. On the contrary, in 2024, the central bank will adhere to a supportive monetary policy stance and comprehensively use traditional and innovative monetary policy tools to support economic recovery and improvement. From the perspective of changes in various items of the central bank’s balance sheet, the central bank’s shrinking of the balance sheet mainly occurred after the policy of reducing the reserve ratio, which is a “loose orientation”. At the same time, it is closely related to the operation of new tools such as treasury bond trading and buyout reverse repurchase. Looking ahead to 2025, China will implement a moderately loose monetary policy.
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