Solid moves expected to deliver policy shift(3)

Innovative measures

While there is no strict, uniform definition of unconventional countercyclical adjustments, economists said the term in general refers to stimulus measures other than interest rate cuts, RRR reductions and traditional open market operations, and usually involves closer coordination of monetary and fiscal policies such as quantitative easing, or QE, taken by some advanced economies.

"QE is unlikely to be among the central bank's options, but the pattern of moderately loose monetary policy over the next period may exhibit similar characteristics," Ming said.

China still has room for conventional adjustments, while typical quantitative easing takes place when the conventional policy space exhausts, and it involves central bank subscription of government bonds in the primary market, which is prohibited by Chinese law, he said.

Instead, the central bank is expected to step up secondary-market government bond trading to facilitate expansion in government bond issuance, Ming said, with his team forecasting that central bank net purchases of treasury bonds may increase to 2.24 trillion yuan in 2025.

In August, the central bank started secondary-market treasury bond trading as a tool to provide liquidity and manage bond market yields, with a net purchase of 1 trillion yuan for the whole year, data from the PBOC showed.

Ming added that there is scope for innovating targeted tools to directly support consumer spending.

The PBOC statement on Friday said it will enrich the monetary policy toolbox, carry out the trading of government bonds and pay attention to changes in long-term yields, while vowing more targeted measures to meet reasonable consumer financing needs.

The central bank also reiterated its commitment to keeping the development of the financial market stable, with an emphasis on "maintaining capital market stability".

On Thursday, the PBOC completed the operation for the second time of a policy tool that encourages stock market investments by financial institutions.

Lu Ting, chief China economist at Nomura, said that if the central bank launches unconventional policy tools, in coordination with fiscal policy, to help clear unpaid debt in the real estate sector, it would greatly help mitigate financial risks and facilitate a more robust economic recovery.