PBOC: Refining Reserve Requirement System, Conducting Open Market Operations with Flexibility and Precision
nashnova research
PBOC Deputy Governor Lu Lei confirmed that China's monetary-policy framework will shift from quantity-based to price-based during the 15th Five-Year Plan — replacing aggregate financing and money-supply targets with policy-rate anchoring, while advancing renminbi internationalization.
What does "quantity-based to price-based" actually mean?
Until now the PBOC steered policy mainly by watching aggregate social financing and money supply (M2) — in effect, controlling how much water flows from the tap.
This means → going forward the central bank will stop counting "how much money was released" and instead set "the price of money," i.e. the policy rate.
In plain terms = switching from "control the volume" to "set the water price" and letting the market decide how much to use.
How does an interest-rate signal reach your loan rate?
Lu outlined the transmission chain: PBOC policy rate → market benchmark rates → all financial-market rates.
This means → when the PBOC moves once, short-end money-market rates should follow quickly, and bank lending rates should adjust in turn.
This reflects an admission that blockages remain — if transmission worked smoothly, the PBOC would not need repeated verbal guidance.
What are structural tools doing on the ground?
As of end-June 2026, structural monetary-policy tools supporting the "five priority areas" (tech finance, green finance, etc.) totaled ¥4.6 trillion.
Related lending grew 10.9% year-on-year, showing targeted "drip irrigation" continues to scale up.
In plain terms = the PBOC is redesigning the big framework while still running dedicated pipelines to priority sectors.
Where are the exchange rate and RMB internationalization headed?
Lu stated explicitly: China has no need and no intention to depreciate the yuan for trade advantage.
During the 15th Five-Year Plan the PBOC will develop the offshore market, issue treasury bonds and central-bank bills on a regular basis, and build a high-grade RMB asset pool.
This means → the lever for RMB internationalization is shifting from "encourage RMB settlement" to "give offshore investors something worth buying and holding."
Can this reform actually land? What is the test?
Whether the rate-based framework can replace quantity targets depends on how smoothly the policy rate transmits to market rates.
If the chain is blocked — the PBOC cuts but bank lending rates don't move — the reform stays on paper.
This reflects the real verification point: not the framework itself, but whether markets actually follow the rate signal.
市场有风险，内容仅供研究参考，不构成投资建议。