At a recent press conference, officials from the People's Bank of China (PBOC) discussed monetary policy operations and financial data for the first half of 2026. The central bank highlighted the effectiveness of current measures in supporting the economy and outlined its future policy direction.

PBOC Deputy Governor and Spokesperson Zou Lan stated that financial data from the first half shows monetary policy has had a clear effect in bolstering the real economy. Financial aggregates have grown reasonably, overall social financing costs remain at historically low levels, credit structure continues to improve, and financial markets are operating stably.

Future Policy Stance and Adjustments

Zou indicated that in the next stage, the PBOC will continue to implement a prudent and accommodative monetary policy. The central bank will adjust the intensity, pace, and timing of its measures based on domestic and international economic and financial conditions as well as market performance. It will enhance the intensity of counter-cyclical and cross-cycle adjustments, focusing on expanding domestic demand, optimizing supply, and strengthening the internal drivers of economic growth. This aims to consolidate and expand the positive momentum of a stable and improving economy, effectively supporting a strong start to the 15th Five-Year Plan period.

Refining Open Market Operations

Regarding open market operations, Zou noted that the volume and variety of operations can vary significantly due to complex factors affecting banking system liquidity, including fiscal payments, reserve requirements, and cash withdrawals. He emphasized that the size of any single operation serves the overall need for liquidity management and should not be interpreted in isolation as a signal of policy direction. Short-term market interest rates are a more suitable indicator to observe.

The PBOC will continue to steadily advance reforms to improve its monetary policy operational framework, aiming to better guide overnight market rates to operate stably around the policy rate. It will study gradually increasing the frequency of overnight reverse repo operations in line with primary dealers' needs and maintain communication with the market.

Shift in Financing Structure

PBOC Monetary Policy Department Director Xie Guangqi commented on changes in financing structure. He noted that while the growth rate of RMB loans slowed in the first half, bond financing, particularly corporate bond financing, increased significantly. Corporate bond net financing reached 2.07 trillion yuan, up 916.7 billion yuan year-on-year.

Xie suggested this shift in financing structure may be long-term and trend-setting, reflecting deep adjustments in China's economic structure, the transition between old and new growth drivers, and the ongoing dynamic adaptation of the financial system alongside deepening supply-side structural reforms in finance.

Looking ahead, monetary and credit growth will continue shifting from extensive expansion to intensive development. A scenario of "slower loan growth with improved quality" may become a new norm in macroeconomic operations.

Broadening the View of Financing Conditions

Xie stated that the PBOC is continuously optimizing its monetary policy framework, gradually downplaying quantitative intermediate targets, and shifting from quantity-based to price-based regulation to foster an appropriate monetary and financial environment. A single loan indicator no longer fully reflects the financing conditions for the real economy. He suggested observing the combined total of loans and bonds while paying more attention to comprehensive indicators like interest rates and financing structure that reflect overall social financing conditions.

Utilizing a Diverse Policy Toolkit

Zou Lan explained that the PBOC has a rich toolkit, including reserve requirement ratios (RRR), reverse repos, Medium-term Lending Facilities (MLF), and treasury bond transactions. RRR cuts primarily focus on injecting long-term liquidity, while tools like reverse repos and MLF provide short- to medium-term liquidity. In practice, the PBOC will appropriately select and combine these tools based on liquidity management needs to maintain ample liquidity and guide the growth of aggregate social financing and money supply to match economic growth and price level targets.

Managing Interest Rates and Financing Costs

On interest rates, Zou noted that China's economy has continued a generally stable and improving development trend this year, demonstrating strong resilience and vitality. However, the foundation for sustained stable and sound growth needs further consolidation. Regarding prices, while the Producer Price Index (PPI) has rebounded relatively noticeably due to imported inflationary factors, the Consumer Price Index (CPI) increase has been moderate.

Going forward, the PBOC will guide and manage interest rate levels based on macroeconomic performance, price trends, and the needs of macroeconomic regulation to keep overall social financing costs low.

Regulating Market Behavior and Ensuring Policy Transmission

PBOC Spokesperson and Director of the Survey and Statistics Department Yan Xiandong addressed certain market activities. He noted that growth rates for the scale of asset management products, funds raised from non-financial enterprises, and funds flowing back to the banking system via interbank deposits and certificates of deposit have all been significantly higher than the growth rates of aggregate social financing, broad money supply (M2), and financial institution deposits and loans. The PBOC will strengthen monitoring, analysis, and enforcement of interest rate policies, and enhance regulation of unreasonable market behaviors that weaken monetary policy transmission.

Maintaining Stable Exchange Rates

On exchange rates, Zou Lan stated that geopolitical conflicts have pushed up international energy prices this year, elevating global inflation and leading to monetary policy adjustments by some foreign central banks. Faced with a complex and changing international landscape, the RMB exchange rate has generally moved steadily, maintaining two-way fluctuations. Looking ahead, factors influencing the RMB are multifaceted, with both appreciating and depreciating pressures present. The RMB exchange rate is expected to continue its two-way fluctuations.

The PBOC will closely monitor changes in the international economic and financial situation, implement its accommodative monetary policy to create a suitable monetary and financial environment for sustained economic improvement. Simultaneously, it will adhere to the market's decisive role in exchange rate formation, leverage the exchange rate's function as an automatic stabilizer for macroeconomic and balance of payments adjustments, and keep the RMB exchange rate basically stable at a reasonable and equilibrium level.

Developing the Panda Bond Market

Zou also commented on Panda bonds (RMB-denominated bonds issued by foreign entities in China). He stated that international institutions issuing Panda bonds, with proceeds used for cross-border trade settlement, real project investment, and industrial chain funding, demonstrates full recognition of China's institutional environment, development prospects, and the RMB. It also further enriches global investors' channels for RMB asset allocation, fostering a sustainable ecosystem for RMB usage.

The PBOC will continue to steadily promote the high-quality development of the Panda bond market, facilitating foreign institutions' participation in the issuance and trading of onshore Panda bonds.