PBOC deputy governor outlines plan to reform loan pricing benchmarks
PBOC Deputy Governor Zou Lan says the central bank will shift from relying mainly on the loan prime rate toward a more diversified set of pricing benchmarks, while adapting to rising direct financing and supporting tech and green sectors.
People's Bank of China Deputy Governor Zou Lan said the central bank will push for a gradual transformation and optimisation of the monetary policy framework, including giving greater play to the role of interest-rate adjustments, improving market-based interest-rate formation, control and transmission mechanisms, and enhancing the precision of short-end rate controls. Speaking at the International Financial Leaders Investment Summit, he said the PBOC will promote reform of loan pricing benchmarks, moving from a relatively single reference to the loan prime rate toward a more diversified set of pricing benchmarks.
Zou noted that as China's economic structure undergoes transformation and upgrading, corporate assets are increasingly shifting toward technology, data, brands and human capital, and financing needs are becoming more diverse. The financing structure is undergoing long-term trend changes, with the share of direct financing rising steadily. Last year, the combined share of bonds and stocks in total social financing exceeded that of loans for the first time, and in the first three quarters of this year, that share stood at 49.5 per cent. Loan structures have also shifted from being dominated by real estate and infrastructure toward technology, green and other high-quality development sectors.
The deputy governor said the PBOC will adapt to the rising share of direct financing by further building a modern financial market, establishing a multi-category, multi-tier financial market system, and actively developing the bond market and equity market to meet the diverse financing needs of various types of business entities at different development stages. He added that the central bank will improve the technology segment of the bond market, cultivate and expand patient capital, and enhance the financial system's ability to support technological innovation, so as to better leverage the financial market's price-discovery and resource-allocation functions and create favourable conditions for the transformation of the monetary policy framework.
Zou also said that as the economy transitions between old and new growth drivers, investment in real estate and traditional infrastructure is declining, while new-type infrastructure represented by the so-called 'six networks' is accelerating to take over. He forecast that related investment in this area will reach 25 trillion to 30 trillion yuan over the next five years, strongly supporting the expansion of effective investment. He added that China's push for high-standard opening-up and allowing the market to play a decisive role in exchange-rate formation will help reduce uncertainties in cross-border economic and trade activities, stabilise investment expectations, and facilitate global sharing of China's development dividends.