Pan Gongsheng at the Lujiazui Forum: Improve the short-term interest rate control mechanism and create an overseas central bank repo facility.

June 17, the 2026 Lujiazui Forum was held in Shanghai, with the theme "Financial Development and Cooperation under the Global Governance Initiative: New Vision, New Challenges and New Opportunities." Pan Gongsheng, Governor of the People's Bank of China, announced a package of policy measures at the forum, covering pilot offshore RMB forex trading, creation of a repurchase tool for foreign central banks, research on liquidity support mechanisms for non-bank institutions, and improvement of short-term interest rate control mechanisms. At the meeting, Pan Gongsheng announced that **six banks—Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and China CITIC Bank—will be authorized to use the China Foreign Exchange Trade System platform to carry out offshore RMB forex trading in the Shanghai Free Trade Zone, and will further promote the development of the offshore RMB forex trading market based on the pilot's progress**. These measures involve various aspects, including exchange rate market construction, liquidity management of overseas institutions, risk prevention for non-bank institutions, and the monetary policy operation framework, collectively demonstrating the authorities’ intention to deepen RMB internationalization and strengthen the resilience of financial markets. Creation of Foreign Central Bank Repurchase Tool to Facilitate RMB Liquidity Management for Foreign Institutions Pan Gongsheng also announced the creation of a repurchase tool for foreign central banks. **According to this arrangement, foreign central banks or monetary authorities, international financial organizations, sovereign wealth funds, etc. can use high-grade bonds such as Chinese government bonds as collateral to obtain RMB liquidity from the People’s Bank of China via repurchase transactions.** The creation of this tool is intended to provide a more stable liquidity support channel for overseas official institutions holding RMB assets, helping to reduce their concerns about the liquidity of RMB assets and further strengthen the international appeal of RMB assets. Research on Non-bank Liquidity Support Tools to Address Systemic Pressure in Bond Markets At the level of the financial stability mechanism, Pan Gongsheng stated that the central bank is researching the establishment of macroprudential tools to support liquidity for non-bank institutions in specific scenarios. **According to this design, when markets such as bonds experience systemic pressure, normal liquidity channels are blocked, and groups of institutions collectively face a liquidity crisis that may trigger systemic risks, the central bank will use swap transactions to provide emergency liquidity to non-bank institutions.** This tool is clearly positioned as an emergency arrangement for extreme scenarios, with trigger conditions including systemic pressure, blockage of normal channels, and collective crisis, and it is not a conventional liquidity supply mechanism. Improvement of Short-term Interest Rate Control Mechanism, Corridor Narrowed to 50 Basis Points Regarding the monetary policy operation framework, Pan Gongsheng announced the improvement of the short-term interest rate control mechanism. On the basis of establishing temporary overnight repo and reverse repo tools in July 2024, the central bank will improve the usage mechanism of related tools and adjust the operating rate to 7-day reverse repo operation rate plus or minus 25 basis points, narrowing the interest rate corridor from the previous 70 basis points to 50 basis points. Meanwhile, Pan Gongsheng said that the central bank will further enrich the open market operation toolbox and timely add overnight reverse repo operation varieties to better meet the short-term liquidity needs of the banking system. **The narrowing of the interest rate corridor means that the volatility space for market short-term interest rates will be further reduced, which will help strengthen the efficiency of monetary policy transmission and lower the uncertainty of short-term market interest rates.** Risk Warning and Disclaimer The market is risky, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their specific circumstances. Investing based on this article is at your own risk.