The 2026 Lujiazui Forum commenced today. Pan Gongsheng, Governor of the People's Bank of China, announced a series of upcoming policy initiatives.
First, to refine the short-term interest rate control mechanism. To further advance the transition of the monetary policy framework towards a price-based model and enhance the precision and effectiveness of short-term rate control, the PBoC will explore and optimize the interest rate control mechanism. On one hand, building upon the establishment of the temporary overnight repo/reverse repo facility in July 2024, the central bank will improve the operational mechanisms for these tools. The operation rate will be adjusted to the 7-day reverse repo rate plus or minus 25 basis points, narrowing the band from 70 basis points to 50 basis points. On the other hand, the PBoC will further enrich the open market operations toolkit, adding an overnight reverse repo operation when appropriate to better meet the short-term liquidity needs of the banking system.
Second, to create an offshore central bank repo facility (FIMA RMB Repo). This facility will be established for overseas central bank-type institutions, including foreign central banks or monetary authorities, international financial organizations, and sovereign wealth funds. These entities can obtain RMB liquidity from the PBoC by pledging high-grade bonds such as Chinese government bonds as collateral via repo transactions. This will facilitate RMB liquidity management and RMB asset allocation for these overseas institutions.
Third, to launch a pilot program for offshore RMB foreign exchange trading in the Shanghai Free Trade Zone. To promote two-way opening of the foreign exchange market, foster integration between onshore and offshore markets, and support Shanghai in building itself into a global hub for RMB asset allocation and risk management, the PBoC will authorize six banks—including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and China CITIC Bank—to conduct offshore RMB foreign exchange trading within the Shanghai FTZ using the China Foreign Exchange Trade System platform. The PBoC will further promote the development of the offshore RMB foreign exchange trading market based on the pilot's outcomes.
Fourth, to research the establishment of a macroprudential tool for providing non-bank liquidity support under specific scenarios. This involves studying a policy instrument to provide emergency liquidity to non-bank financial institutions via swap arrangements when systemic stress emerges in markets such as bonds, normal liquidity channels are obstructed, and a group of institutions faces a liquidity crisis that could trigger systemic risk. The mechanism's design will balance maintaining stable financial market operations with guarding against moral hazard in financial markets. The "specific scenarios" designation means this mechanism is not a routine liquidity supply for non-bank institutions. "Guarding against moral hazard" means non-bank institutions must meet macroprudential requirements and provide high-quality collateral for central bank operations.
Fifth, to jointly issue the "Shanghai International Financial Center Offshore Finance Action Plan" with the Shanghai Municipal Government and relevant departments. The PBoC will gradually improve the institutional framework for offshore finance, encompassing business rules, risk management, and the business environment. It will steadily advance offshore finance businesses such as FTZ offshore bonds, offshore trade financial services, and international treasury centers, supporting Shanghai in taking the lead in constructing an offshore finance business system that matches its status as an international financial center.
Sixth, the formal launch of the interbank market data reporting repository. By centrally collecting data on transactions, custody, and settlement, this repository aims to enhance the ability to conduct penetrating monitoring of financial markets, serving both regulatory needs and market participants.
Additionally, the Shanghai Digital RMB International Operations Center, announced last year, is now fully operational. The Digital RMB Cross-border Settlement Comprehensive Service Platform (CBETS) has also officially launched.
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