The PBOC's Q1 Monetary Policy Meeting Focuses on External Shocks; Escalating Middle East Situation Intensifies Domestic Price Divergence, Strait Blockade Impacts Six Global Industrial Chains --- April 2 Macroeconomic Insights

On March 31, the People's Bank of China released the Q1 2026 Monetary Policy Committee regular meeting notes, highlighting increased vigilance toward overseas uncertainties. The current monetary policy stance is "wait and see," with the central bank considering that the necessity for reserve requirement or interest rate cuts is low, as the willingness for real-sector financing remains subdued and the current economic recovery relies more on new growth drivers such as high-end midstream manufacturing.

The worsening situation in the Middle East is pushing up energy prices, intensifying the domestic price divergence where the upstream rises but not the downstream, while the supply-demand imbalance remains unresolved. However, the fundamental logic that geopolitical conflicts will boost China’s export market share still holds, and the market expects that export performance might replicate the high growth seen in 2020-2021.

As the straits continue to be blocked, six critical global industrial chains are under threat. For example, oil and gas are maintaining supply gaps, finished oil and power cost chains will further push up corporate expenses, basic chemical products lack strategic reserves, and in fertilizer and food supply chains, nitrogen fertilizer is most severely affected.