China-EU Ties - China Calls for 'Restraint' as India Strikes Pak-based Terror Sites - PBOC's 10 Steps for Moderately Loose Monetary Policy
Hi folks, it’s been quite the day, given developments between India and Pakistan. If you are interested in understanding what’s happened, I recommend this press briefing by the Indian side.
Here is how Beijing has officially responded to India’s overnight attacks on terror bases in Pakistan.
“Amid escalating tensions between India and Pakistan, India launched military strikes on targets in Pakistan on the early morning of May 7, which met strong response from Pakistan. What’s China’s comment?
China finds India’s military operation early this morning regrettable. We are concerned about the ongoing situation. India and Pakistan are and will always be each other’s neighbors. They’re both China’s neighbors as well. China opposes all forms of terrorism. We urge both sides to act in the larger interest of peace and stability, remain calm, exercise restraint and refrain from taking actions that may further complicate the situation.”
For more, do check out this piece from my colleague Anushka Saxena on how Chinese analysts had been discussing the India-Pakistan situation prior to the strikes.
Here are the key reports and articles that I found noteworthy from the People’s Daily’s edition on Wednesday, May 07, 2025.
Page 1: Let’s begin with the report on Xi Jinping exchanging congratulations with European Council President Antonio Costa and European Commission President Ursula von der Leyen over the 50th anniversary of diplomatic ties between China and the European Union.
“Xi Jinping pointed out that China and the EU are comprehensive strategic partners, as well as two major forces promoting multipolarisation, two major markets supporting globalisation, and two major civilisations advocating diversity. Over the past 50 years since the establishment of diplomatic relations, both sides have maintained close exchanges at all levels and in all fields, with fruitful outcomes in dialogue and cooperation, vibrant people-to-people exchanges, and effective multilateral coordination. China-EU relations have become one of the most influential bilateral relations in the world, and have made important contributions to improving the well-being of the Chinese and European peoples and promoting world peace and development.” 习近平指出，中国和欧盟是全面战略伙伴，也是推动多极化的两大力量、支持全球化的两大市场、倡导多样性的两大文明。建交50年来，双方各层级、各领域交往密切，对话合作成果丰硕，人文交流有声有色，多边协调卓有成效。中欧关系已经成为世界上最具影响力的双边关系之一，为增进中欧人民福祉、促进世界和平和发展作出了重要贡献。
“Xi Jinping stressed that at present, the great changes unseen in a century in the world are accelerating in their evolution, and human society has once again come to a critical crossroads. A healthy and stable China-EU relationship not only promotes mutual achievements, but also illuminates the world. I attach great importance to the development of China-EU relations and am willing to work with President Costa and President von der Leyen to take the 50th anniversary of the establishment of diplomatic relations to summarize the experience of China-EU relations development, deepen strategic communication, enhance understanding and mutual trust, consolidate the positioning of partnership, expand mutual openness, properly handle frictions and differences, and open up an even better future for China-EU relations. China and the EU should adhere to multilateralism, defend fairness and justice, oppose unilateral bullying, work together to meet global challenges, jointly promote an equal and orderly world multipolarisation and inclusive economic globalisation, and make greater contributions to world peace, stability, development and prosperity.” 习近平强调，当前，世界百年变局加速演进，人类社会再次来到关键十字路口。一个健康稳定的中欧关系，不仅成就彼此，而且照亮世界。我高度重视中欧关系发展，愿同科斯塔主席和冯德莱恩主席一道努力，以建交50周年为契机，总结中欧关系发展经验，深化战略沟通，增进理解互信，巩固伙伴定位，扩大相互开放，妥处摩擦分歧，开辟中欧关系更加美好的未来。中欧双方要坚持多边主义，捍卫公平正义，反对单边霸凌，携手应对全球性挑战，共同推动平等有序的世界多极化和普惠包容的经济全球化，为世界和平、稳定、发展、繁荣作出更大贡献.
Xinhua adds: “For their part, EU leaders said over the past 50 years, China has achieved the most rapid and sustained economic growth in history, noting that the EU and China have forged extensive ties, become each other’s most important trading partners and contributed to the well-being of their people and the prosperity of their economies. Against the backdrop of global uncertainty and geopolitical shifts, the EU, they said, stands ready to deepen its partnership with China, strengthen exchanges and cooperation, uphold the purposes and principles of the United Nations Charter, work hand in hand to address common challenges, and promote global peace, security, prosperity and sustainable development.”
Xi also congratulated Friedrich Merz on his election as chancellor of the Federal Republic of Germany. Xinhua reports:
“Noting that China and Germany are all-round strategic partners, Xi said since establishing diplomatic relations 53 years ago, the two countries have treated each other with mutual respect, trust and equality. The two countries have consistently followed a path of mutually beneficial and win-win cooperation, growing into good partners that advance together and help each other succeed, and promoting the steady and sound development of bilateral relations through high-level cooperation, said Xi. Today’s world is marked by intertwined transformation and upheaval, with surging headwinds of unilateralism and protectionism, Xi noted. Yet peace, development, cooperation and win-win outcomes remain the right way forward for humanity and an unstoppable trend of the times, Xi said. As the world's second- and third-largest economies and two major countries with global influence, China and Germany should follow the trend of history, uphold fairness and justice, deepen exchanges and mutual learning, strengthen solidarity and cooperation, work together to weather storms and tempests, enhance the well-being of their peoples, and jointly promote an equitable and orderly multipolar world and an inclusive economic globalization, said Xi. Xi said he highly regards the development of China-Germany relations, and is ready to work with the chancellor to stick to the original aspiration in establishing diplomatic relations, consolidate political mutual trust, deepen exchanges and cooperation, and open a new chapter in the all-round strategic partnership between China and Germany, so as to guide China-EU cooperation in the right direction, and jointly promote world peace, stability, and prosperity.”
Li Qiang also sent a message. He said: “the practical cooperation between the two sides in various fields has yielded remarkable results and has broad prospects. Equality, mutual benefit, cooperation, and win-win outcomes are the historical choices made by both countries and the most distinctive features of China-Germany relations, which should be carefully nurtured, inherited and promoted by both sides.”
Also on the page is a report on Han Zheng’s comments at the reception marking the 50 years of China-EU ties.
“Han Zheng said that since the establishment of China-EU ties 50 years ago, exchange and dialogue between the two sides have become increasingly close, the integration of interests has deepened, and the scale and level of cooperation have been greatly improved, which has contributed to the development of both sides, and benefited the world. As President Xi Jinping pointed out, China and the EU have no fundamental conflicts of interest or geopolitical contradictions, and are partners in mutual achievement. In the current international situation marked by intertwined changes and turbulence, China-EU relations have even greater strategic significance and global impact. Both sides should take the opportunity of celebrating the 50th anniversary of the establishment of diplomatic ties, uphold the original aspiration of establishing diplomatic relations, accurately grasp the general trend, adhere to the positioning of partnership, uphold mutual respect, openness and cooperation, mutual benefit and win-win outcomes, and promote the sustained and sound development of China-EU relations. Together, they should safeguard multilateralism, the international system with the United Nations at its core, the international order based on international law, and the multilateral trade system with the World Trade Organization at its core, jointly opening up another 50 years of China-EU relations that is even more worth looking forward to, and making greater contributions to world peace, stability, development, and prosperity.”
“Before the reception, Han Zheng separately met with former President of the European Council Charles Michel and the representative of EU ambassadors to China. Han Zheng gave a positive assessment of the 50 years of China-EU relations development, stating that the recent full resumption of exchanges between the legislative bodies of China and the EU has provided new momentum for the development of China-EU relations. As two major stabilizing and constructive forces in the world, China and the EU, facing a complex and turbulent international situation, should shoulder their due responsibilities, strengthen dialogue, deepen cooperation, properly handle economic and trade differences, and jointly uphold multilateral trade rules and order.” 韩正表示，中欧建交50年来，交往对话日益紧密，利益融合不断加深，合作规模和水平大幅提升，既成就彼此，也惠及世界。正如习近平主席指出，中欧没有根本利害冲突，也没有地缘政治矛盾，是相互成就的伙伴。在当前变乱交织的国际形势下，中欧关系具有更加重要的战略意义和世界影响。双方要以庆祝建交50周年为契机，秉持建交初心，准确把握大势，坚持伙伴关系定位，坚持相互尊重、开放合作、互利共赢，推动中欧关系持续向前、向好发展，携手维护多边主义和以联合国为核心的国际体系、以国际法为基础的国际秩序、以世界贸易组织为核心的多边贸易体制，共同开辟中欧关系下一个更加值得期待的50年，为世界和平、稳定、发展、繁荣作出更大贡献。招待会前，韩正分别会见欧洲理事会前主席米歇尔和欧盟驻华使节代表。韩正积极评价中欧关系50年发展，表示日前中欧立法机构全面恢复交流，为中欧关系发展提供了新动力。中欧作为全球两大稳定性、建设性力量，面对复杂动荡的国际形势，要肩负起应有责任，加强对话、深化合作、妥处经贸分歧，共同维护多边贸易规则和秩序.
Next, there’s a report on Ding Xuexiang’s comments during a symposium on studying the first volume of selected works of Xi Jinping on the economy. The report says:
“Ding Xuexiang pointed out that since the 18th Party Congress, facing the severe and complex international environment and the arduous domestic tasks of reform, development, and stability, the Party Central Committee with Comrade Xi Jinping as the core has strengthened centralised and unified leadership over economic work, put forward a series of new concepts, new ideas, and new strategies, formed Xi Jinping Economic Thought, and successfully pioneered new frontiers in Marxist political economy. The scientific theory of the Party and great practice have advanced in sync, leading China’s economic development to achieve historic achievements and undergo historic changes, fully demonstrating the significant theoretical, practical, and global significance of Xi Jinping Economic Thought. Ding Xuexiang stated that we must deeply grasp the core principles and practical requirements of Xi Jinping Economic Thought to comprehensively advance Chinese-style modernisation through high-quality development. We must adhere to the people-centered approach, remember that the people’s hearts are the greatest politics, and ensure that the fruits of development benefit all people more equitably. We must fully, accurately, and comprehensively implement the new development concept, accelerate the construction of a new development pattern, comprehensively deepen reforms, develop new quality productive forces according to local conditions, and promote economic achievement of effective qualitative improvement and reasonable quantitative growth. We must adhere to scientific thinking methods and working methods, maintain strategic determination, pursue progress while ensuring stability, strengthen systematic concepts, and better coordinate development and security. Ding Xuexiang emphasised that the centralized and unified leadership of the Party Central Committee with Comrade Xi Jinping as the core is the fundamental guarantee for China's economic ship to brave the winds and waves and sail steadily toward prosperity. Leaders at all levels must continuously deepen their understanding of the decisive significance of the ‘Two Establishments’ from the glorious journey of the new era, enhance the ‘four consciousnesses’, strengthen the ‘four self-confidences’, and achieve the ‘two safeguards’. We must pay more attention to economic work from the height of political awareness, continuously improve capabilities and standards, improve work styles, and ensure the effective implementation of the Party Central Committee’s decisions and arrangements.” 丁薛祥指出，党的十八大以来，面对严峻复杂的国际环境和艰巨繁重的国内改革发展稳定任务，以习近平同志为核心的党中央加强对经济工作的集中统一领导，提出一系列新理念新思想新战略，形成了习近平经济思想，成功开拓了马克思主义政治经济学新境界。党的科学理论与伟大实践同频共进，引领我国经济发展取得历史性成就、发生历史性变革，充分彰显了习近平经济思想的重大理论意义、实践意义、世界意义。丁薛祥表示，要深刻把握习近平经济思想的核心要义和实践要求，以高质量发展全面推进中国式现代化。坚持以人民为中心，牢记民心是最大的政治，让发展成果更多更公平惠及全体人民。坚持完整准确全面贯彻新发展理念，加快构建新发展格局，全面深化改革，因地制宜发展新质生产力，推动经济实现质的有效提升和量的合理增长。坚持科学的思想方法和工作方法，保持战略定力，坚持稳中求进，强化系统观念，更好统筹发展和安全。丁薛祥强调，以习近平同志为核心的党中央集中统一领导，是我国经济航船乘风破浪、行稳致远的根本保证。各级领导干部要从新时代的光辉历程中不断深化对“两个确立”决定性意义的认识，增强“四个意识”、坚定“四个自信”、做到“两个维护”。更加重视从讲政治的高度做经济工作，不断提高能力和水平，改进工作作风，确保党中央决策部署落地见效.
Page 2: There’s a report informing that according to statistics, as of April 30, all 265 listed companies on the Beijing Stock Exchange have disclosed their 2024 annual reports. In 2024, the 265 companies on the Beijing Stock Exchange achieved a total operating income of 180.845 billion yuan, with an average operating income of 682 million yuan, which was basically the same as the previous year; a total net profit of 11.03 billion yuan, an average net profit of 41.6218 million yuan. 225 listed companies achieved profitability. Among the listed companies on the Beijing Stock Exchange, small and medium-sized enterprises accounted for about 80%. These achieved a total operating income of 104.78 billion yuan in 2024, a year-on-year increase of 6.76%.
Outside the paper today, we have two important reports to note.
Second, China has confirmed that He Lifeng will be meeting with US Treasury Secretary Scott Bessent in Switzerland during his visit to the country from May 9 to 12. China’s Ministry of Commerce’s said:
“The new U.S. administration has taken a series of unreasonable and unilateral tariff measures, which have severely disrupted bilateral economic and trade ties and the international economic and trade order, posing serious challenges to the recovery of the global economy. In order to defend its legitimate rights and interests, China has taken resolute countermeasures…Recently, the U.S. side has expressed willingness to engage in dialogue on tariffs and related issues through multiple channels. After a careful assessment of the U.S. messages, China has decided to engage with the U.S. side, taking into account global expectations, national interests, and calls from the American industry and consumers, the spokesperson said. He, as the Chinese lead person for China-U.S. economic and trade affairs, will have a meeting with the U.S. lead person Treasury Secretary Scott Bessent, according to the Chinese Foreign Ministry. The spokesperson noted that China’s position has been consistent -- if forced to fight, China will fight to the end, and for talks, the door is open. Any negotiations must be based on mutual respect, equality, and reciprocal benefit. If the U.S. side wants to resolve issues through dialogue, it must face the negative impact of its unilateral tariffs and respect international trade rules, fairness and justice, as well as rational voices from all sectors, the spokesperson said. The spokesperson said the U.S. side must demonstrate sincerity, correct its wrong practices, and meet China halfway in a bid to resolve concerns of both sides through equal consultation. The spokesperson warned against any attempts to use dialogue as a cover for coercion or blackmail, and stressed that China will not seek to reach any agreement at the expense of sacrificing its principles or the cause of international fairness and justice.”
“Also commenting on ongoing negotiations between the United States and other economies, the spokesperson said compromise does not earn respect, and only by holding firm to principles and fairness and justice can countries safeguard their interests. China remains committed to expanding opening up and will resolutely defend the multilateral trading system centered on the World Trade Organization and share development opportunities with all countries in the world, the spokesperson said. China stands ready to work with all parties to deepen mutually beneficial cooperation, enhance coordination, and jointly resist unilateral protectionism and hegemonic bullying practices, in a bid to uphold free trade and multilateralism and promote an inclusive economic globalization, the spokesperson added.”
Third, the PBOC has announced a set of 10 policies as part of its moderately loose monetary policy. This is unlocking liquidity but also committing more spending. The 10 steps are:
Reduce the RRR by 0.5 percentage points, which is expected to provide approximately 1 trillion yuan of long-term liquidity to the market.
Temporarily reduce the RRR for auto finance companies and financial leasing companies from the current 5% to 0%.
Reduce policy interest rates by 0.1 percentage point, specifically lowering the 7-day reverse repo operation interest rate in the open market from the current 1.5% to 1.4%, which is expected to drive the Loan Prime Rate (LPR) down by about 0.1 percentage point simultaneously.
Reduce the interest rates of structural monetary policy tools by 0.25 percentage points, including: all types of special structural tool interest rates and re-lending rates for supporting agriculture and small businesses, from the current 1.75% to 1.5%; and the Pledged Supplementary Lending (PSL) interest rate from the current 2.25% to 2%.
Reduce the personal housing provident fund loan interest rate by 0.25 percentage points. The rate for first-time homebuyers with terms over five years is reduced from 2.85% to 2.6%, with interest rates for other terms adjusted accordingly.
Increase the re-lending quota for technological innovation and technical transformation by 300 billion yuan, from the current 500 billion yuan to 800 billion yuan, to continuously support the implementation of the ‘Two New’ policy.
Establish a 500 billion yuan re-lending facility for service consumption and elderly care, guiding commercial banks to increase credit support for service consumption and elderly care.
Increase the re-lending quota for supporting agriculture and small businesses by 300 billion yuan, creating synergy with the policy of reducing relevant tool interest rates, to support banks in expanding loan disbursements to agricultural, small and micro, and private enterprises.
Optimise two monetary policy tools supporting the capital market, allowing securities, fund, and insurance companies to combine the use of the 500 billion yuan swap facility and the 300 billion yuan stock repurchase and increased holdings re-lending quota, for a total quota of 800 billion yuan.
Create a risk-sharing tool for technological innovation bonds, where the central bank provides low-cost re-lending funds that can purchase technological innovation bonds, and cooperates with local governments, market-based credit enhancement institutions, etc., through diversified credit enhancement measures such as joint guarantees, to share part of the default loss risk of bonds, providing support for technological innovation enterprises and equity investment institutions to issue low-cost, long-term technological innovation bonds for financing.