Summary of the PBoC's Monetary Policy Report for 25Q3 Industry Overview - **Industry**: Chinese Monetary Policy and Economic Outlook - **Entity**: People's Bank of China (PBoC) Key Points and Arguments 1. Limited New Information on Cyclical Policies - The PBoC's Monetary Policy Report (MPR) for 25Q3 indicates limited new information regarding near-term monetary policies - The report maintains a "moderately loose" tone, pledging to keep social financing conditions loose and liquidity ample - Growth is on track to meet the "around 5%" target for the year, with no expected cuts to policy rates or RRR in the remaining months of 2025 [5][4][6] 2. Inflation Outlook - The PBoC has become cautiously optimistic about the inflation outlook, noting "improvement in prices" compared to previous assessments - The report emphasizes the importance of a "reasonable rebound of prices" and acknowledges support from a national unified market and consumption [6][4][7] 3. Aggregate Financial Statistics - The PBoC discussed a structural shift in China's aggregate financial statistics, indicating that bank loans may not be the best measure of financing as the system evolves - The report highlights that the property sector's downturn has kept loan numbers low, suggesting that Total Social Financing (TSF) and monetary aggregates are better gauges of financial health [7][4][8] 4. Interest Rate System Focus - The PBoC has made minor adjustments to its policy rate system, including changes to the operations of the 14-Day Reverse Repo - The report outlines the PBoC's focus on various interest rate gaps as indicators of policy transmission efficiency, including the gap between policy rates and market rates, and the net interest margin (NIM) [8][9][10] 5. Exchange Rate Flexibility - The wording in the MPR regarding exchange rate flexibility has changed, indicating a focus on maintaining flexibility and preventing overcorrection risks - Despite a strong consensus for RMB appreciation, the report suggests that the upcoming CEWC will provide more significant insights into future currency policies [14][15][4] 6. Future Policy Expectations - The report anticipates a potential 20 basis points cut in policy rates in 2026E to support the property sector, with a slower pace of loan rate reductions observed in 25Q3 - The average corporate loan rates dropped by 8 basis points to 3.14% in September compared to June, while mortgage rates remained unchanged at 3.06% [11][4][12] Additional Important Insights - The PBoC's focus on the interest rate system and its implications for financial stability are critical, especially with the NIM at an all-time low of 1.42% - The report suggests that the demand side remains a key concern for future economic performance, particularly in the context of medium-to-long term inflation concerns [11][6][4]

Core Viewpoint - Vietnam has actively borrowed from the RMB exchange rate system to enhance the flexibility of the VND exchange rate, allowing for two-way fluctuations in its exchange rate mechanism, which is crucial for strengthening financial cooperation with China and expanding bilateral currency settlement [1][30]. Group 1: Historical Exchange Rate Mechanism - Before 2015, Vietnam maintained a fixed exchange rate system pegged to the USD, experiencing significant depreciation during financial crises, with a cumulative depreciation of over 26% during the Asian financial crisis and 30% during the US subprime mortgage crisis [2][3]. - The exchange rate system was characterized by narrow fluctuations and intermittent large depreciations, despite being classified as a hard peg by the IMF [3][6]. Group 2: Reform and Development of Exchange Rate Mechanism - In 2014-2015, Vietnam initiated reforms to its exchange rate formation mechanism to stabilize the foreign exchange market and support its economic reforms [6][7]. - The official exchange rate was established based on supply and demand in the foreign exchange market, with the State Bank of Vietnam managing the exchange rate through monetary policy tools and market interventions [7][8]. Group 3: Introduction of the Intermediate Rate Mechanism - Following China's "8•11" exchange rate reform in 2015, Vietnam introduced an intermediate rate mechanism for the VND, allowing for a more flexible exchange rate that reflects market conditions and trade relationships [9][10]. - The VND exhibited a "half-following" characteristic to the RMB, where it remained stable against the USD until depreciation pressure accumulated, leading to a quick depreciation [11][15]. Group 4: Two-Way Fluctuation and Increased Flexibility - Since 2020, the VND has achieved two-way fluctuations, allowing for more elastic movements in response to market conditions, with significant depreciation occurring in 2022-2024 [16][25]. - The correlation between the VND and RMB has strengthened, with the VND no longer maintaining stability against the USD during RMB appreciation, but rather following the RMB's movements [25][26]. Group 5: Future Outlook for the VND - The VND has experienced a depreciation trend since February 2025, with a 5.06% depreciation against the USD and approximately 6.85% against the RMB [31][35]. - Key factors influencing the future exchange rate include trade tensions with the US and the Federal Reserve's hawkish stance, which may exert additional pressure on the VND [36][37].