Pan Gongsheng Announces Sweeping Financial Reform Package: How Big Are the Reform Dividends?

On June 17, a series of heavyweight policies were launched at the 2026 Lujiazui Forum. PBOC Governor Pan Gongsheng announced a sweeping package of forthcoming financial reform measures, covering the optimization of short-term interest rate control, the creation of a RMB repo facility for overseas central banks, the expansion of offshore RMB foreign exchange trading in the Shanghai Free Trade Zone, the study of liquidity tools for non-bank institutions in specific scenarios, and the issuance of the Action Plan for the Development of Offshore Finance at the Shanghai International Financial Center.

The entire package of policies balances the multiple objectives of monetary policy framework transformation, RMB internationalization, financial market stability, and the development of Shanghai's offshore finance.

What key signals does this round of intensive policy releases send? To what extent can the implementation of the RMB repo facility for overseas central banks boost the willingness of overseas entities to hold RMB bonds? How will the expansion of the offshore foreign exchange trading pilot and the issuance of the offshore financial action plan open up the onshore and offshore markets? The study of establishing dedicated liquidity tools for non-bank institutions—what gaps in risk response will be filled?

For the questions of common concern in the market, Yicai Global interviewed authoritative market experts at the first time for interpretation.

Optimizing Short-Term Interest Rate Control

Pan Gongsheng announced that the People's Bank of China will further explore and optimize the interest rate control mechanism. On the one hand, building on the establishment of the temporary overnight repo/reverse repo tool in July 2024, the use mechanism of the tool will be improved and the operating interest rate will be adjusted to 25 basis points above and below the 7-day reverse repo operating interest rate, narrowing the range from 70 basis points to 50 basis points. On the other hand, the open market operation toolbox will be further enriched, and the overnight reverse repo operation variety will be added in due course to better match the short-term liquidity needs of the banking system.

Authoritative market experts said that narrowing the range of the temporary repo and improving the use mechanism is conducive to better playing the role of the policy interest rate pricing anchor.

Internationally, other major central banks have, in the process of improving their monetary policy frameworks, also enhanced their control over short-term interest rates by narrowing the interest rate corridor. Previously, the upper and lower limits of the PBOC's temporary repo interest rate were +50bp and -20bp, respectively, and the tolerance for short-term interest rate fluctuations was relatively large.

Authoritative market experts said that this year, the overnight interest rate DR001 has basically operated within the range of 20 basis points above and below the policy interest rate, and the central bank's move to narrow the temporary repo interest rate range also reflects the general principle of seeking progress while maintaining stability.

Creating a RMB Repo Facility for Overseas Central Banks

Pan Gongsheng announced that the People's Bank of China will officially introduce a repo facility for overseas central banks to engage in RMB liquidity arrangements through the interbank market.

Authoritative market experts said that the design of this facility is a very important institutional arrangement and is also a key move to steadily promote the internationalization of the RMB.

For a long time, one of the constraints on foreign central banks in increasing their holdings of RMB assets has been the convenience of liquidity management. The introduction of this facility will effectively enhance the willingness and stickiness of foreign central banks to hold RMB assets.

Expanding Offshore RMB Foreign Exchange Trading in the Shanghai Free Trade Zone

Pan Gongsheng announced that the People's Bank of China will support the expansion of the offshore RMB foreign exchange trading pilot in the Shanghai Free Trade Zone, introduce more types of trading varieties, and at the same time improve the offshore RMB liquidity management and the offshore RMB clearing network. The new action plan will also increase support for the two-way opening-up of cross-border trade, cross-border investment, and cross-border financing.

Authoritative market experts said that the offshore RMB foreign exchange market is an important part of the offshore RMB market system. Expanding the offshore RMB foreign exchange trading pilot will help enrich the offshore RMB product system, meet the diverse trading needs of market entities, and further promote the two-way opening-up of the financial market.

Studying Liquidity Tools for Non-Bank Institutions in Specific Scenarios

Pan Gongsheng announced that the People's Bank of China is studying the establishment of dedicated liquidity tools for non-bank institutions in specific scenarios.

Authoritative market experts said that the central bank is studying the establishment of dedicated liquidity tools for non-bank institutions in specific scenarios, which can be used to quickly inject liquidity into specific non-bank institutions facing temporary liquidity difficulties, in order to avoid risks spilling over into the banking system and the broader financial market.

Issuing the Action Plan for the Development of Offshore Finance at the Shanghai International Financial Center

Pan Gongsheng announced that the People's Bank of China, together with the National Development and Reform Commission and other departments, has issued the Action Plan for the Development of Offshore Finance at the Shanghai International Financial Center, which systematically designs the development of offshore finance and clarifies the timetable and roadmap for the next 5 to 10 years.

Authoritative market experts said that the issuance of this action plan marks the formal launch of Shanghai's pilot program for developing offshore finance, and the offshore financial market will become another important platform for the two-way opening-up of China's financial market, providing a more complete offshore financial service system for "going-out" enterprises and foreign institutions.