People’s Bank of China outlines monetary policy framework shift and confirms the seven-day reverse repo rate as the main policy rate

The People’s Bank of China published remarks by Deputy Governor Xuan Changneng from international meetings in Reykjavik and Basel, where he set out how the bank is advancing a transition in China’s monetary policy framework in response to structural changes in the economy and financial system. In his keynote at the Central Bank of Iceland’s Annual Economic Conference, Xuan described a shift away from quantity-based targets toward greater reliance on price-based tools such as interest rates, alongside further development of a market-based interest rate control mechanism that identifies the open market seven-day reverse repurchase operations rate as the main policy rate. He also highlighted an expanded monetary policy toolkit that includes secondary-market trading of government bonds, further development of a system of structural monetary policy tools including arrangements to maintain capital market stability, and efforts to raise transparency through regularised, institutionalised policy communication and expectation management. During the Bank for International Settlements Governors’ meeting in Basel, he exchanged views with other central bank governors on global economic and financial conditions, corporate investment under uncertainty, regional economic and financial integration amid global fragmentation, and household inflation expectations.