During the National Two Sessions, Pan Gongsheng, the Governor of the People's Bank of China, attended the economic theme press conference of the Fourth Session of the 14th National People's Congress, responding to market concerns.
&#34;Based on a review and summary of the main work of monetary policy since 2025, Pan Gongsheng clearly stated that the moderately loose monetary policy will continue, and he expressed that efforts will be made to coordinate the goals, tools, and transmission of monetary policy to build a scientific and robust monetary policy system.&#34; Dong Ximiao, Chief Economist at Zheshang Securities, told reporters from the Financial Times that this addresses important issues of concern to the market and helps increase the transparency of monetary policy, better guiding market expectations.
<h2>The tone of moderately loose monetary policy remains unchanged, creating a suitable monetary and financial environment for the high-quality development of the real economy</h2>
Regarding the central bank's monetary policy orientation for 2026, Pan Gongsheng made it clear that in 2026, the People's Bank will earnestly implement the central government's deployment, continue to implement a moderately loose monetary policy, and take promoting stable economic growth and reasonable price recovery as important considerations for monetary policy. The central bank will flexibly and efficiently use various monetary policy tools such as reserve requirement ratio cuts and interest rate reductions, leveraging the integration and synergy effects of incremental and stock policies, as well as monetary and fiscal policies, to create a favorable monetary and financial environment for a good start to the &#34;14th Five-Year Plan.&#34; He provided detailed explanations from the perspectives of quantity, interest rates, structure, and exchange rates.
In fact, in recent years, China's monetary policy has consistently maintained a supportive stance. A review shows that since the second half of 2018, China has cut the reserve requirement ratio 18 times, continuously providing medium- and long-term liquidity that plays a role in the banking system and financial markets. Compared to the peak since the current interest rate reduction cycle began in the second half of 2018, policy interest rates have been cut a total of 10 times, with a cumulative reduction of 1.15 percentage points, guiding corporate loan rates and personal mortgage rates down by 2.5 and 2.7 percentage points, respectively. Roughly estimated, the current balance of RMB loans is about 270 trillion yuan, and with a 2.5 percentage point decrease in loan rates, it saves borrowers over 6 trillion yuan in interest expenses annually.
Moreover, compared to the monetary policies of central banks in developed economies, China's monetary policy has long been based on a cross-cycle perspective, avoiding large-scale tightening and loosening, thus providing stronger continuity and stability in supporting the real economy. The level of personal mortgage rates in China is already close to the average level of mortgage rates during the &#34;zero interest rate&#34; periods in the United States, the United Kingdom, and Japan.
&#34;This reaffirmation of the moderately loose stance of monetary policy is also a 'reassurance' for the market,&#34; said an industry expert, noting that the unchanged supportive monetary policy stance creates a suitable monetary and financial environment for the high-quality development of the real economy.
&#34;Pan Gongsheng's proposal to 'flexibly and efficiently use various monetary policy tools such as reserve requirement ratio cuts and interest rate reductions' indicates that reserve requirement ratio cuts and interest rate reductions remain options for monetary policy operations, but it is expected that these will be balanced against multiple objectives, making 'timely choices.' In the future, adjustments will be made based on changes in the economic and financial situation and the operation of the macroeconomy, guiding and regulating interest rate levels while emphasizing the quality and long-term effects of policy implementation.&#34; Wen Bin, Chief Economist at China Minsheng Bank, explained. At the same time, the central bank will increasingly use various liquidity injection tools such as pledged and reverse repos, MLF, and open market transactions of government bonds, combining short, medium, and long-term measures to achieve &#34;smoothing peaks and filling valleys,&#34; maintaining reasonable liquidity and stable funding rates
Stabilizing the market and expectations.
At the structural level, this year's structural monetary policy tools will focus on supporting the expansion of domestic demand, technological innovation, and small and micro enterprises. &#34;In January of this year, to better promote policy effectiveness, the central bank has already introduced eight policies, including structural interest rate cuts, to facilitate the use of re-loans and rediscounts for supporting agriculture and small enterprises, and to increase the scale and scope of structural monetary policy tools,&#34; Wen Bin stated. These measures aim to enhance the attractiveness of structural tools, strengthen precise drip irrigation, avoid redundancy in policy resources, and improve the precision and efficiency of policy tool support.
<h2>Properly handle the &#34;three balances&#34; to build a scientific and robust monetary policy system</h2>
In addition to responding to the current policy stance, Pan Gongsheng also clarified that in the medium to long term, specifically during the &#34;14th Five-Year Plan&#34; period over the next five years, the People's Bank of China will implement the &#34;14th Five-Year Plan&#34; outline, construct a scientific and robust monetary policy system, and properly manage the relationships between short-term and long-term, stabilizing growth and preventing risks, and internal and external factors, advancing from the perspectives of monetary policy goals, tools, and transmission.
This is consistent with the central bank's previous statements. As early as the Lujiazui Forum in June 2024, Pan Gongsheng had proposed that &#34;China's monetary policy should focus on grasping and properly handling the relationships among short-term and long-term, stabilizing growth and preventing risks, and internal and external factors.&#34;
Regarding the balance of the aforementioned three relationships, interviewed experts indicated that the central bank's consideration of short-term and long-term goals is primarily reflected in its adherence to counter-cyclical and cross-cyclical adjustments. In addition, the People's Bank of China's daily operations will also reasonably weigh short-term and long-term factors.
In balancing stabilizing growth and preventing risks, industry insiders noted that past monetary policy operations have fully demonstrated the central bank's art of balance. &#34;The central bank has always comprehensively considered stabilizing growth and preventing risks.&#34; Interviewed experts mentioned that it can be seen that the central bank has been striving to maintain ample liquidity in the banking system at the aggregate level, ensuring that monetary credit matches actual demand, while also adhering to not engaging in &#34;flood irrigation&#34;; in terms of pricing, guiding commercial banks to benefit the real economy while also achieving the banks' own sound operations, supporting banks in replenishing capital, and guiding the downward cost of bank liabilities to enhance the sustainability of banks' services to the real economy.
For internal and external balance, it is reflected in that China's monetary policy mainly considers the need for regulation based on domestic economic and financial conditions, while also taking into account the spillover effects of other economies' economic and monetary policy cycles. &#34;Monetary policy is primarily based on domestic development,&#34; Dong Ximiao mentioned. Under the misalignment of policy cycles, China's monetary policy has withstood external pressures and supported the expansion of domestic effective demand. Policy adjustments are prudent and cautious.
Regarding how to advance the construction of a scientific and robust monetary policy system, Pan Gongsheng clearly stated that he will coordinate the advancement of the construction of a scientific and robust monetary policy system from the perspectives of monetary policy goals, tools, and transmission.
&#34;The transformation of the monetary policy framework from quantity-based to price-based is an important hallmark of modern monetary policy frameworks.&#34; An expert explained to the Financial Times that with the development of financial markets and the improvement of economic modernization, internationally, central banks in the U.S., Europe, and Japan experienced accelerated financial disintermediation in the 1980s and 1990s, leading to a decline in the controllability, measurability, and relevance of quantity targets to the real economy, gradually downplaying quantity intermediary targets and shifting towards price-based regulation
This is also the direction of the transformation of China's monetary policy framework.
At the transmission level, Wen Bin stated that it is expected to further consolidate and optimize the transformation of the monetary policy framework in the next two years, facilitating the transmission from policy interest rates to market benchmark interest rates, and then to various financial market interest rates. &#34;Considering that current credit interest rates are at historically low levels, protecting bank interest margins remains an important goal. The expression regarding the overall financing costs for society has also shifted from 'promoting a decrease' last year to 'facilitating low-level operation.' The subsequent reduction in financing costs will be achieved more through 'regulating the operational behavior of the credit market and reducing financing intermediary fees,' including orderly expanding the coverage of the comprehensive financing cost work for corporate loans.&#34;
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The Governor of the People's Bank of China, Pan Gongsheng, stated during the National Two Sessions that the central bank will continue to implement a moderately accommodative monetary policy to promote stable economic growth and a reasonable recovery in prices. He emphasized the need to coordinate monetary policy from the aspects of targets, tools, and transmission, and to increase transparency to guide market expectations. In recent years, China's monetary policy has remained supportive, having repeatedly lowered the reserve requirement ratio and policy interest rates, reducing loan rates for enterprises and individuals to create a favorable financial environment for the real economy

- During the 14th National People's Congress, PBOC Governor Pan Gongsheng affirmed a continued moderately loose monetary policy to support economic stability and growth in 2026.  
- The central bank will focus on flexible implementation of tools such as interest rate adjustments and targeted measures for structural support, particularly for small businesses and domestic demand.  
- Experts suggest that this strategy aims to balance short-term stability with long-term growth, while ensuring effective transmission of monetary policy to the broader economy.

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China's central bank's supervisory media: How to implement a moderately loose monetary policy?