Citing experts, the Securities Daily reported on Thursday, the People’s Bank of China (PBOC) is expected to expand Pledged Supplementary Lending (PSL) in 2023 as it constitutes the "precise and powerful" monetary policy called for by the Central Economic Work Conference.

Additional takeaways  

“Given local government debt and pressure on commercial banks net interest margins, policy banks will play an important role in 2023, and the scale of PSL may increase.”

“The PSL has helped policy banks support projects in real estate and new infrastructure.”

“The targeted lending tool supports weak links in the economy, and can effectively guide long-term interest rates down.”

Market reaction

USD/CNY is trading modestly flat on the day at around 6.8890, having stalled its recovery from four-month lows of 6.8762 reached on Tuesday.