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Investing.com -- China’s central bank offered a more optimistic assessment of inflation in its third-quarter monetary policy report, attributing moderation in CPI during the third quarter of 2025 to declining food prices.
The People’s Bank of China (PBoC) highlighted improving services demand and core inflation as signs of price stabilization. The central bank also viewed the narrowing contraction in Producer Price Index (PPI) as a positive signal of a healthier competitive environment and marginal price improvement.
Addressing slowing RMB loan growth, the PBoC clarified that the importance of indirect financing in aggregate credit has declined. New RMB loans accounted for 48.3% of total social financing in January-September 2025, down from 60% in the same period last year, while direct financing through bonds and equity rose to 44.4% from 34.8%.
The central bank explained that light-asset industries are less credit-intensive than traditional sectors like real estate, and slower overall credit growth aligns with softer nominal GDP growth and a higher base.
The report noted that with commercial banks increasing bond purchases rather than extending loans, and the central bank increasingly using relending to allocate base money, indicators of base money and broad money (M2) are likely to be affected.
In line with the 15th Five-Year Plan proposal, the PBoC expressed stronger commitment to advancing RMB internationalization. The bank aims to expand RMB usage in cross-border trade and investments, deepen international monetary cooperation, and develop the offshore RMB market.
The language shifted from "steadily promoting RMB capital account convertibility" in the second-quarter report to "enhance the openness level of capital account."
The PBoC also emphasized the importance of maintaining reasonable relationships between different interest rates, noting that relative interest rate levels guide resource allocation as funds flow toward higher-yielding assets, reducing arbitrage opportunities and ensuring smooth monetary policy transmission.
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