The central bank confirms a loose monetary policy tone, and the liquidity environment may undergo a major change by 2026

The People’s Bank of China’s 2026 Work Conference has just concluded, sending an important signal: continue to implement moderately loose monetary policy. This is not simply a policy continuation but an active adjustment in response to the new economic situation. The meeting emphasized leveraging the integrated effects of incremental and stock policies, and increasing countercyclical and cross-cycle adjustments. In simple terms, the central bank aims to find a balance between stabilizing growth and preventing risks, with more flexible tools and greater力度.

Policy Toolbox Fully Opened

The meeting clearly outlined the central bank’s policy toolbox for 2026, whose flexible application will directly impact market liquidity:

• Flexibly use various monetary policy tools such as reserve requirement ratio cuts and interest rate reductions
• Maintain ample liquidity
• Keep social financing conditions relatively loose
• Guide the reasonable growth of total financial assets and balanced credit deployment
• Smooth the monetary policy transmission mechanism and leverage the guiding role of policy interest rates
• Keep the RMB exchange rate basically stable at a reasonable and balanced level

What does this mean? The central bank will not rely solely on one or two tools to respond passively but will actively adjust based on economic conditions. Traditional tools like reserve requirement ratio cuts and interest rate reductions are clearly within the scope of consideration, which is a positive signal for market liquidity.

Potential Market Impacts

Liquidity Environment Improvement

Loose monetary policy means interbank liquidity will remain ample. This typically lowers financing costs and increases investable funds in the market. In such an environment, investors usually increase allocations to risk assets, including stocks, bonds, and alternative assets like cryptocurrencies.

Price Rebound as a Policy Consideration

The meeting specifically emphasized “making high-quality economic development and reasonable price rebound important considerations of monetary policy.” This indicates that the central bank believes current price pressures are manageable and has room for easing operations. The expectation of a gentle price rebound often encourages investors to seek assets that preserve and增值 their wealth.

Exchange Rate Stability Maintained

The meeting explicitly stated “keeping the RMB exchange rate basically stable at a reasonable and balanced level, and preventing exchange rate overshoot risks.” This provides the market with a stable expectation and also implies that the central bank will intervene when necessary. A relatively stable exchange rate environment is conducive to predictable cross-border capital flows.

What to Watch Next

Based on policy statements, the easing tone of the central bank in 2026 is certain, but specific implementation details remain to be observed:

• When will reserve requirement ratio cuts and interest rate reductions be initiated, and by how much
• The specific scale and pace of liquidity injections
• Actual growth rate of social financing and money supply
• Actual performance of the RMB exchange rate
• Trends in price data

Summary

The signals from the central bank’s work conference are very clear: there will be no tightening in 2026; instead, the policy will continue to be accommodative. This is positive for market participants seeking liquidity. Ample liquidity usually increases the attractiveness of risk assets, including cryptocurrencies and other alternative assets, which may garner more attention. However, it is important to note that this easing is targeted and aimed at serving the high-quality development of the real economy, not unlimited liquidity release. Market participants should continue to monitor the actual implementation of policies, not just the policy statements.