China is set to accelerate improvements to its central bank system, aiming to promote high-quality financial development. The People’s Bank of China (PBOC) will focus on enhancing the twin-pillar regulatory framework of monetary policy and macro-prudential policy. This initiative is expected to stabilize both the currency value and the financial system. The PBOC plans to shift from quantitative targets to price-based tools like interest rates, enriching its monetary policy toolkit. These efforts are part of a broader strategy to boost policy communication, transparency, and systemic risk management.
Strengthening the Regulatory Framework
China’s central bank is committed to improving its regulatory framework to ensure financial stability. The focus will be on enhancing the twin-pillar system, which includes monetary policy and macro-prudential policy. By doing so, the PBOC aims to maintain the stability of the currency value and the overall financial system. This approach will involve a gradual shift from quantitative targets to price-based tools such as interest rates. The central bank will also work on enriching its monetary policy toolkit to better manage economic fluctuations.
Efforts will be made to boost policy communication and enhance transparency. The PBOC believes that clear and transparent policies are crucial for maintaining market confidence and stability. Additionally, the central bank will improve mechanisms for forestalling and defusing systemic risks. This includes strengthening the financial market infrastructure and building a higher-standard open financial system.
The PBOC will promote high-standard financial opening-up with a market-oriented, law-based, and internationalized approach. This will increase the transparency, stability, and predictability of relevant policies. The central bank will also deepen institutional opening-up in the financial sector, steadily advancing the internationalization of the yuan.
Supporting the Real Economy
The central bank’s efforts are not limited to financial stability; they also aim to support the real economy. The PBOC will adhere to a supportive monetary policy, intensifying counter-cyclical and cross-cyclical adjustments to stabilize expectations. This approach is designed to help consolidate the country’s economic recovery trend. The central bank will focus on striking a balance between short-term and long-term objectives, growth stabilization and risk prevention, and domestic demand and external conditions.
In its regulation of monetary policy, the PBOC will implement already-introduced policies and measures. The central bank will also develop additional policy tools and enhance policy coordination to meet annual economic and social development goals. This includes the development of technology finance, green finance, inclusive finance, pension finance, and digital finance.
The PBOC is committed to preventing the emergence of systemic risks. This involves balancing economic growth, structural adjustments, and risk prevention. The central bank will increase the efficacy of financial regulation, advance legislation on financial stability, and resolve risks in areas such as local government debt, real estate, and small and medium-sized banks.
Enhancing Financial Market Infrastructure
Improving the financial market infrastructure is a key component of the PBOC’s strategy. The central bank will work on strengthening the financial market and its infrastructure to support high-quality financial development. This includes building a higher-standard open financial system that is more resilient to shocks and better able to support economic growth.
The PBOC will also focus on enhancing policy communication and transparency. Clear and transparent policies are essential for maintaining market confidence and stability. The central bank will improve mechanisms for forestalling and defusing systemic risks, ensuring that the financial system remains stable and resilient.
Efforts will be made to promote high-standard financial opening-up with a market-oriented, law-based, and internationalized approach. This will increase the transparency, stability, and predictability of relevant policies. The PBOC will also deepen institutional opening-up in the financial sector, steadily advancing the internationalization of the yuan.
The central bank’s initiatives are designed to create a more friendly and inclusive business environment. By promoting financial openness and security, the PBOC aims to support sustainable economic growth and development. The central bank will continue to work on enhancing the financial market infrastructure to ensure that it can effectively support the real economy.
