In a policy article carried by People’s Daily, the People’s Bank of China set out how it intends to strengthen the “dual-pillar” framework of monetary policy and macroprudential management in line with the Communist Party of China’s guidance for the 15th Five-Year Plan, framing the objective as better integrating price stability and financial stability. The note argues that while the monetary policy pillar is relatively mature, the macroprudential pillar needs to be further developed and coordinated more tightly with monetary policy. On monetary policy, the priorities include optimising base money injection arrangements across short, medium and long tenors, refining intermediate targets by de-emphasising quantity objectives and creating conditions for a stronger interest rate channel, and improving market-based interest rate formation and transmission by strengthening the policy rate role, narrowing the short-term interest rate corridor and improving Loan Prime Rate quoting quality. Other priorities include using structural tools in a targeted and time-varying way, further improving the renminbi exchange rate formation mechanism while strengthening expectations management to prevent overshooting, and improving policy transmission by evaluating implementation, curbing “involution-style” competition and funds circulating within the financial system, strengthening coordination with fiscal and industrial policies, and enhancing transparency and institutionalised communication. On macroprudential policy, the article calls for broader coverage across markets and activities, systemically important institutions and financial market infrastructures, and external spillovers, supported by a more standardised monitoring and assessment framework; an expanded policy toolkit spanning systemically important institutions, broad credit, real estate finance and cross-border capital flows; and a stronger financial stability safety net, including “hard-constraint” early corrective mechanisms, a more specialised deposit insurance resolution function, use of industry and financial stability funds, and progress on drafting or revising key financial legislation including the central bank and financial stability laws.
Central Bank of the Republic of China 2025-12-04
People's Bank of China outlines 15th Five-Year Plan priorities for a more interest rate-led monetary policy and comprehensive macroprudential framework
The People’s Bank of China aims to enhance the "dual-pillar" framework of monetary policy and macroprudential management, aligning with the Communist Party's 15th Five-Year Plan. Key monetary policy priorities include optimizing base money injection, refining interest rate channels, and improving renminbi exchange rate mechanisms. Macroprudential policy focuses on broader market coverage, an expanded toolkit, and a stronger financial stability safety net.