SocGen Says Modest Central Bank Easing Suggests A Bigger Role for Fiscal Policy to Play in China

12:16 PM EST, 01/15/2026 (MT Newswires) -- China's central bank (PBoC) announced several targeted easing measures earlier Thursday at a joint briefing with State Administration of Foreign Exchange (SAFE), said Societe Generale.

The key measures are:

-- Effective next Monday, a 25bps cut in structural policy interest rates -- the one-year relending rate from 1.5% to 1.25%, the PSL rate from 2.0% to 1.75%, and the structural policy tool rate from 1.5% to 1.25%;

-- An expansion of structural policy re-lending schemes: 1) with rural and small and medium-sized enterprises (SME) loans increased by RMB500 billion to RMB3.5 trillion; 2) Tech loans increased by RMB400 billion to RMB1.2 trillion;

-- Within rural and SME support loans, a quota of RMB1 trillion will be designated for private enterprises;

-- A reduction in the minimum down payment ratio for commercial property to 30% from 50%.

SocGen estimated only small savings for banks from the rate cut (about RMB10 billion to RMB20 billion per year, based on the outstanding stock of PSL and structural instruments), and the bank is doubtful that the lower downpayment ratio will meaningfully support commercial property, given ample supply.

The PBoC will likely still need to cut policy rates later this year, but the scope may be smaller than SocGen's current forecast of 20bp, while fiscal policy will play a more important role.

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