China signals it will use flexible monetary policy tools.
The People's Bank of China, the country's central bank, has signaled its readiness to flexibly and effectively deploy a range of monetary policy tools – including cuts to the reserve requirement ratio and interest rates – to maintain ample liquidity and guide reasonable growth in the overall financial system.
This commitment was made at the People's Bank of China's (PBoC, the central bank) 2026 work conference, held from January 5-6, to set key policy priorities for this year.
At the conference, the PBoC also reiterated its commitment to maintaining a stable and balanced yuan exchange rate, while guarding against the risk of excessive volatility.
To better protect financial stability, the PBoC said it will establish institutional arrangements to provide liquidity to non-bank financial institutions under specific circumstances, and ensure the effective use of two targeted monetary policy tools designed to support capital market stability.
The conference also highlighted the role of central bank currency swap agreements in facilitating the use of the renminbi in trade and investment, and called on financial institutions to improve cross-border financial services.
Measures will also be taken to enhance infrastructure for cross-border use of the RMB, encourage more qualified foreign issuers to participate in the panda bond market, expand connectivity between fast payment systems, and promote cooperation on QR code interoperability.
