Pan Gongsheng, Governor of the People’s Bank of China (PBoC), outlined a set of upcoming policy measures at the 2026 Financial Street Forum Annual Conference on October 19. He clarified priorities for the transformation of the monetary policy framework in the near and medium term, and responded to hot topics including the RMB exchange rate, impacts of artificial intelligence and financial policy responses.

Pan introduced multiple policy initiatives to be rolled out by the PBoC. Specifically, the central bank will jointly launch a liquidity support facility with the State Administration of Financial Regulation and the China Securities Regulatory Commission to tackle large-scale redemptions by non-bank financial institutions, expand the scope of institutions eligible for the Standing Lending Facility (SLF), push forward the connectivity between the interbank bond market and the exchange bond market, pilot measures to further facilitate overseas financial institutions’ RMB buying and selling businesses in the onshore foreign exchange market, and issue the Guiding Opinions on Financial Support for Building International Science and Technology Innovation Centers in Beijing (Beijing-Tianjin-Hebei Region), Shanghai (Yangtze River Delta) and the Guangdong-Hong Kong-Macao Greater Bay Area together with the Ministry of Science and Technology and nine other departments.

Regarding the new liquidity support facility, Pan stated that it aims to establish a stabilization mechanism for the bond market. Balancing the prevention of systemic risks in the financial market system and moral hazard, the facility will be activated under specific circumstances when asset management institutions encounter clustered liquidity stress and a negative “redemption-fire sale” loop emerges in the bond market. Eligible institutions include bank wealth management subsidiaries, public fund managers, as well as their parent banks and securities parent companies.

On the connectivity between the interbank bond market and the exchange bond market, Pan said the PBoC and the CSRC have carried out substantial preparatory work, and the connectivity is now ready for launch. It will go live after tests conducted by bond market infrastructure operators and market participants.

On the transformation and improvement of China’s monetary policy framework, Pan noted that the priority in the near and medium term is to give greater play to interest rate regulation.

He elaborated on three aspects: further optimizing the regulation mechanism for short-end interest rates; advancing the reform of the loan interest rate pricing benchmark, shifting from sole reliance on the Loan Prime Rate (LPR) to a more diversified pricing benchmark system; and phasing out the benchmark deposit and lending rates.

He mentioned that the overnight interbank repo rate has effectively become the target rate for the PBoC’s monetary policy regulation. Meanwhile, the tenor of the central bank’s main open market operation instruments and key policy rates remains seven days, creating a mismatch.

“To enhance the precision of interest rate regulation, we will study switching the tenor of the central bank’s primary open market operation instruments to overnight at an appropriate time. The overnight open market repo rate will then become the main policy rate accordingly,” Pan said.

As for the reform of loan interest rate pricing benchmarks, Pan explained that as diversified benchmarks mature, financially robust enterprises may, through negotiation with financial institutions, independently choose either the overnight interbank repo rate or the LPR as the benchmark for floating-rate loans. The LPR will continue to serve as the pricing benchmark for small business loans and personal loans.

Pan also addressed several widely watched topics.

On the RMB exchange rate, he said China adopts a managed floating exchange rate regime based on market supply and demand and adjusted with reference to a basket of currencies. The RMB exchange rate has experienced multiple appreciation and depreciation cycles in recent years, featuring two-way fluctuations and greater flexibility.

On RMB internationalization, he said the PBoC will further deliver high-quality policies to foster a better environment for domestic and overseas entities to hold and use the RMB.

Turning to the impacts of artificial intelligence and corresponding financial policy responses, he said supported by sound infrastructure and talent reserves, AI has been widely deployed across China and is playing an increasingly important role in driving economic growth.

Pan outlined three key tasks for the PBoC going forward: closely monitoring and assessing the macroeconomic implications of AI development; scaling up financial support for the AI industry; and prudently promoting the application of AI in the financial sector.

Source: Shanghai Securities News