PBOC charts 2026 course for monetary policy and financial stability

The People's Bank of China (PBOC) held its 2026 work conference from January 5-6, reviewing 2025 achievements and outlining key arrangements for the coming year. Governor Pan Gongsheng addressed the conference, emphasizing an appropriately accommodative monetary policy and comprehensive financial risk mitigation.

Accommodative policy supports real economy

In 2025, facing complex economic and financial conditions, the PBOC resolutely implemented decisions to support the real economy and ensure smooth financial market functioning.

It introduced a new package of monetary policy measures, including reductions in the required reserve ratio (RRR) and policy interest rates, effectively lowering overall financing costs.

The central bank also deepened financial supply-side structural reform and addressed financial risks in key areas in an orderly manner.

Significant progress was made in improving the central banking system, establishing monetary and macroprudential policy frameworks, and promoting RMB internationalization.

The PBOC actively participated in global financial governance, including mechanisms like the G20, and supported the opening of the IMF Shanghai Center.

Financial services for high-quality development were enhanced across five major areas: technology, green, inclusive, old-age, and digital finance, with over RMB 1.5 trillion in technology innovation bonds issued.

Flexible tools for 2026 growth

For 2026, the PBOC will continue an appropriately accommodative monetary policy, prioritizing high-quality economic development and a reasonable rebound in prices.

Flexible and efficient use of various tools, such as RRR and interest rate cuts, will maintain ample liquidity and accommodative social financing conditions.

This aims to guide reasonable growth in financial aggregates and balanced credit allocation, ensuring alignment with economic growth and price level targets.

The monetary policy transmission mechanism will be streamlined, fully utilizing policy rates and strengthening oversight to keep overall financing costs low.

The RMB exchange rate will be kept basically stable at an adaptive and equilibrium level, guarding against overshooting risks.

Additionally, the PBOC will enhance financial services for high-quality development, refining policy frameworks for technology, green, inclusive, old-age, and digital finance, and optimizing structural monetary policy tools to support key areas like sci-tech innovation and MSMEs.

Steady hand, strategic focus

The conference reaffirms China's commitment to a stable, growth-oriented financial environment, prioritizing domestic demand and risk control.

While monetary policy remains accommodative, the emphasis on structural tools and targeted support signals a nuanced approach to economic challenges.

This blend of continuity and strategic adaptation aims to ensure a robust start to the 15th Five-Year Plan.