Pan Gongsheng: Research and reserve policy tools to address macroeconomic and financial market fluctuations, and continue to rectify the "involution" competition and capital idling in the financial industry

Recently published in the "Guidance Readings on the Suggestions of the Central Committee of the Communist Party of China for Formulating the 15th Five-Year Plan for National Economic and Social Development" is a signed article by Pan Gongsheng, Governor of the People's Bank of China, titled "Building a Scientific and Robust Monetary Policy System and a Comprehensive Macro-Prudential Management System." Continuously Enhance the Role of Central Bank Policy Rates and Narrow the Width of the Short-Term Interest Rate Corridor In the article, Pan Gongsheng pointed out the need to improve the market-oriented interest rate formation, regulation, and transmission mechanisms. Continuously enhance the role of central bank policy rates, narrow the width of the short-term interest rate corridor, and further smooth the transmission from central bank policy rates to market benchmark rates, and then to various financial market rates. Improve the pricing benchmark for loan interest rates, enhance the quotation quality of the Loan Prime Rate (LPR), and more accurately reflect the level of loan market interest rates. Continuously Optimize Monetary Policy Intermediate Variables and Use Financial Aggregates More as Observational, Reference, and Expectational Indicators Pan Gongsheng noted in the article the need to optimize the mechanism for injecting base currency and the intermediate variables of monetary policy, maintaining reasonable growth in financial aggregates. Gradually build a base currency injection mechanism that combines short, medium, and long-term elements with Chinese characteristics, ensuring ample liquidity in the banking system to fully meet the effective financing needs of the real economy. Continuously optimize monetary policy intermediate variables, downplay the focus on quantitative targets, and use financial aggregates more as observational, reference, and expectational indicators to create conditions for greater effectiveness of interest rate regulation. Continuously Address "Involution" Competition and Capital Circulation in the Financial Industry Pan Gongsheng emphasized the need to continuously smooth the transmission mechanism of monetary policy. Strengthen the assessment of monetary policy implementation, guide financial institutions to improve the transmission effectiveness of monetary policy, especially interest rate policy, and continuously address "involution" competition and capital circulation in the financial industry. Further enhance the coordination and cooperation of monetary policy with fiscal, industrial, and other policies in demand management and structural adjustment. Research and Reserve Policy Tools to Address Macroeconomic and Financial Market Volatility Pan Gongsheng pointed out that globally, macro-prudential policy tools are already quite rich and are still rapidly developing. Based on the assessment results of the macro-prudential monitoring and analysis framework, continue to enrich and improve the toolbox of policy instruments in areas such as systemically important financial institutions, broad credit, real estate finance, and cross-border capital flows. Research and reserve policy tools to address macroeconomic and financial market volatility, and establish a management mechanism for creation, implementation, assessment, feedback, and optimization to make it more standardized and regulated. Adhere to the Decisive Role of the Market in Exchange Rate Formation and Firmly Prevent Exchange Rate Overshooting Risks Pan Gongsheng noted the need to continuously improve the RMB exchange rate formation mechanism. As a large open economy, China must adhere to the decisive role of the market in exchange rate formation, maintain exchange rate flexibility, and effectively utilize the exchange rate as an automatic stabilizer for macroeconomic adjustment and international balance of payments, creating favorable conditions for the independent and effective implementation of monetary policy. At the same time, adhere to bottom-line thinking, strengthen expectation guidance, and firmly prevent exchange rate overshooting risks. Timely Correct and Block Market "Herd Behavior" to Promote Positive Circulation Between the Real Economy and Financial Markets Pan Gongsheng pointed out the need to implement comprehensive risk prevention measures in key areas. For economic operations, prevent significant fluctuations in key areas and industries from impacting the high-quality development process of the economy and finance For key financial institutions, focus on enhancing loss absorption capacity and risk response levels, strengthening early risk identification and early warning, and continuously solidifying additional supervision. For cross-border capital flows, timely implement counter-cyclical regulatory measures based on the situation to maintain overall stability in cross-border capital flows. For the financial market, timely correct and block the market "herd effect," promoting a positive cycle between the real economy and the financial market. For the real estate market, strengthen macro-prudential management of real estate finance, promote stable and healthy development of the real estate market, and assist in building a new model for real estate development. For internet finance, strike a balance between risk prevention and innovation promotion to facilitate its overall stable operation. Continuously updating... Risk warning and disclaimer The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial conditions, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk