Goldman Sachs has revised its forecast for China's monetary policy, now expecting a 10 basis point policy rate cut and a 50 basis point reserve requirement ratio (RRR) cut in the first quarter of 2026. An additional 10 basis point rate cut is anticipated in the third quarter of 2026. This adjustment reflects the People's Bank of China's (PBOC) cautious stance, focusing on foreign exchange stability and structural reforms rather than aggressive stimulus measures. The PBOC's recent report maintains a 'moderately loose' monetary policy but highlights the importance of cross-cyclical adjustments and a shift towards direct financing and local government debt swaps. The report also indicates a preference for gradual yuan appreciation, aligning with RMB internationalization and foreign exchange management strategies, over broad monetary easing.