China’s central bank has signalled room to loosen policy further in 2026 while simultaneously reframing how it steers the economy. In a wide-ranging interview, People’s Bank of China (PBoC) governor Pan Gongsheng said the bank will continue a “moderately loose” monetary stance to support stable growth, a measured recovery in prices, and orderly financial markets, and that there is still space this year for reserve-requirement and interest-rate cuts.
Pan described a two-pronged approach: preserve ample liquidity through conventional instruments such as reserve requirement ratio (RRR) and policy rate adjustments, and rely more heavily on structural, targeted tools to direct credit where it is needed most. He emphasised that the PBoC will coordinate the effects of incremental (new) and stock (existing) policy measures to keep social financing and broad money growth in step with the economy and inflation expectations while pushing down overall financing costs.
Many of the structural measures are already in place. The PBoC said it has cut rates on several targeted facilities by 25 basis points, created a dedicated 1 trillion yuan re-lending facility for private firms, merged and expanded risk-sharing instruments for technology and private-enterprise bond issuance, and boosted quotas for agriculture, small business and tech re-lending by large sums.
Institutional reform of the monetary policy framework is a central theme. Pan outlined plans to shift emphasis away from blunt quantity targets and toward intermediate indicators, strengthen market-based interest-rate formation and transmission, and use government bond operations more actively for liquidity management. The aim is to make interest rates rather than broad aggregates the principal lever of monetary control, while keeping bank-system liquidity ample.
Macroprudential architecture will be beefed up at the same time. The PBoC intends to develop a standardized, quantitative-plus-qualitative system to monitor systemic risk, broaden macroprudential coverage to non-bank finance and financial infrastructure, enrich the policymaker’s toolkit, and pursue legal and governance upgrades—most notably amendments to the PBoC law—to better coordinate macroprudential, monetary and microprudential policies.
On the external front, Pan reiterated Beijing’s push for higher-quality opening: continued liberalisation of financial services and markets, steady internationalisation of the renminbi via expanded cross-border payment systems, and active participation in IMF quota reform and global regulatory dialogues. He framed these steps as part of an effort to build a more inclusive, resilient global financial architecture while defending national financial security.
For international markets the combination of pledged easing and targeted measures matters. The explicit signalling that RRR and rate cuts remain on the table increases the likelihood of further monetary support for growth, which should weigh on bond yields and put modest downward pressure on borrowing costs. At the same time, the PBoC’s insistence on tighter macroprudential oversight and exchange-rate stability suggests Beijing is trying to avoid the side‑effects of blanket stimulus—sudden capital flight, exchange-rate swings or renewed leverage growth.
The PBoC’s strategy faces constraints. China’s financing structure has shifted: new loans now account for a smaller share of aggregate financing growth, increasing the importance of bond markets and non-bank channels. That makes targeted facilities and market-based interest-rate transmission essential but also means policy impact depends on banks’ and investors’ willingness to channel funds to intended sectors. Effective support for private firms, technology and consumption will therefore require close fiscal coordination and credible incentives for financial institutions to lend.