Pan Gongsheng: Gradually play the role of government bonds trading in liquidity management to maintain the liquidity adequacy of the banking system.

Governor of the People's Bank of China, Pan Gongsheng, stated that building a scientifically sound monetary policy system and a comprehensive macro-prudential management system is a strategic measure to promote the high-quality development of finance and accelerate the construction of a strong financial country during the "15th Five-Year Plan" period. In recent years, profound changes have occurred in the structure of China's financial system, with the proportion of new loans in the increment of social financing scale by 2025 falling below 50%. In this context, the improvement of the monetary policy framework needs to adapt to the evolving financial system and enhance the scientific and effective regulation. During the "15th Five-Year Plan" period, in order to build a scientifically sound monetary policy system, we will focus on the following six aspects: firstly, optimizing the monetary policy target system, particularly the intermediate variables, to shift focus away from quantity targets and use financial aggregates more as observational, reference, and anticipatory indicators, creating conditions for further leveraging the role of interest rate regulation. Secondly, improving the mechanism for issuing basic currency with short, medium, and long-term coordination and Chinese characteristics, gradually leveraging the role of government bond trading in liquidity management, and ensuring ample liquidity in the banking system. Thirdly, enhancing the market-based interest rate formation, regulation, and transmission mechanism, further facilitating the transmission from the central bank's policy rate to market benchmark rates and various financial market rates. Fourthly, improving the system of structural monetary policy tools to better guide and incentivize financial institutions to optimize loan allocation and carry out major financial tasks. Fifthly, improving the formation mechanism of the RMB exchange rate, insisting on the decisive role of the market in exchange rate formation, maintaining exchange rate flexibility, and guarding against exchange rate over-adjustment risks. Lastly, enhancing policy communication and transparency, further developing a market communication mechanism that is reliable, normalized, and institutionalized.