China’s central bank enacted its first targeted easing move of 2026 on 19 January, trimming re-lending and rediscount rates by 25 basis points. The People’s Bank of China cut rates on a suite of structural monetary tools that supply banks with cheaper, earmarked funding, leaving headline policy rates and the loan prime rate (LPR) unchanged.
The adjustment lowers 3‑month, 6‑month and 1‑year re-lending rates for agricultural and small-business support to 0.95%, 1.15% and 1.25% respectively, sets the rediscount rate at 1.5% and trims related special tool rates to as low as 1.25%. These instruments are not direct loans to companies but cheaper funding for banks, which are expected to pass on lower rates to targeted borrowers in small firms, technology, manufacturing upgrading and green projects.
Beijing frames the move as part of a deliberate “structural easing” approach rather than broad-based monetary loosening. Structural cuts are designed to guide credit toward priority areas without triggering a general decline in market-wide lending rates, which could stoke asset-price inflation or undermine macrofinancial stability.
Analysts note the PBOC is following a playbook seen in 2024, when it first lowered structural tool rates ahead of modest cuts to short-term policy rates later in the year. Research teams in China now judge that after the 25 bps reduction to structural tool rates, the central bank may still consider a policy-rate adjustment of 20–30 bps over the course of 2026 if economic weakness persists.
Domestic economists caution that the targeted cut reduces the immediate urgency for an economy‑wide interest-rate reduction and lowers the odds of an imminent reserve-requirement ratio cut. At the same time, authorities will continue to lean on a mix of open-market operations, large outright reverse repos and flexible government-bond transactions to keep liquidity ample and to smooth the yield curve ahead of heavy sovereign issuance.
For international investors and trade partners, the measure signals Beijing’s preference for calibrating support to structural priorities—SME credit, tech innovation, manufacturing upgrades and green finance—while avoiding broader monetary loosening that could unsettle markets. The move is modest in scale but meaningful in intent: it prioritises directed credit creation over blanket rate cuts, shaping the distribution of China’s next phase of growth stimulus.