The People’s Bank of China (PBOC) unveiled a comprehensive package of improvements to monetary policy on Tuesday, with a view to promoting innovation and quality economic growth. The strategic changes are aimed at boosting domestic demand, tapering the flow of credit, and stabilising the overall financial system.

The central bank cut the interest rate for one-year Pledged Supplementary Lending (PSL) facility from 1.75% to 1.5% to encourage policy banks to support the real economy. The PSL was launched in 2014, and will now look to fund the “six networks,” projects that will cover the water system, new-type power grid, computing, next-gen communications, urban underground pipelines and logistics.

The move comes as a key implementation of an executive meeting of the State Council chaired by Premier Li Qiang, which highlighted the importance of effective macroeconomic policies. The first half of 2026’s gross domestic product (GDP) growth rate was earlier reported to be 4.7% by the country’s National Bureau of Statistics, thus leaving the country on track with 4.5% – 5% growth for the year.

The PBOC is also increasing key relending facilities to support industries specifically. The amount earmarked for the purpose of sci-tech innovation and technological advances will be raised by 200 billion yuan to a total of 1.4 trillion yuan. This expansion directly pushes the banks to invest in equipment renewals and helps small and medium size science and technology enterprises.

The central bank is also raising the agriculture and small business relending quota by 500 billion yuan. From this addition, 300 billion yuan will be dedicated to private companies, with the funds available to private companies going from 1 trillion to 1.3 trillion yuan. This growth is expected to bring down financing costs and create a steady source of low-cost financing for private-sector supply chains, say financial experts.

The Ministry of Finance also signed an agreement with the PBOC and the National Financial Regulatory Administration to launch new housing loan interest subsidies for further stabilizing the economy. The subsidies set to go into effect on October 1, 2026, for a one-year period, belong to the government’s overall architecture of support for the real estate market and are aimed at creating new jobs and ensuring stable growth of incomes.