Pan Gongsheng: Accelerating the transformation of the monetary policy framework and building a scientific and sound monetary policy system
The Zhitong Finance App learned that on September 16, Pan Gongsheng, Governor of the People's Bank of China, published the signed article “Deeply Understanding China's Financial Structural Changes to Improve the Adaptability of Financial Services to the Real Economy” in “Qiushi”. Among them, it is pointed out that the transformation of the monetary policy framework will continue to be promoted and a scientific and sound monetary policy system will be established. Continuously optimize the intermediate variables of monetary policy, reduce the focus on quantitative goals, especially on a single channel of loans, and use total financial volume more as an observational, reference, and predictive indicator. Pay more attention to giving full play to the role of price-oriented regulation and improving market-based interest rate formation, regulation and transmission mechanisms. Improve the short-term interest rate regulation mechanism, further optimize and improve policy interest rates and the construction of supporting systems, and enhance the central bank's role in policy interest rates. Improve interest rate pricing for deposits and loans, and provide business entities with more loan pricing benchmark options. Strengthen the implementation and supervision of interest rate policies, and continue to rectify “internal rolling” competition and capital idling in the financial industry. Improve credible, normalized, and institutionalized policy publicity and market communication mechanisms, and do a good job of policy communication and expectation guidance through professional and practical methods.
The original text is as follows:
Deeply understand changes in China's financial structure to improve the adaptability of financial services to the real economy
Finance is the lifeblood of the national economy. Whether the blood is smooth depends not only on the total volume, but also on the structure. General Secretary Xi Jinping pointed out that a reasonable and healthy financial structure is a prerequisite for continued healthy financial development and effective service for the real economy. In recent years, China's economy has generally been running smoothly, moving towards excellence, and high-quality development has continuously achieved new results, and the financial structure has undergone profound changes in this process. At the same time, it should be noted that with the transformation of old and new economic growth momentum and the deepening of industrial structural transformation, optimizing the financial structure and improving the quality and efficiency of financial services are facing new and higher requirements. Doing a good job in the economy and finance at present and in the coming period requires a deep understanding of the internal logic of changes in China's financial structure, dynamically optimizing and adjusting the monetary policy framework, continuing to build and develop a modern financial market system, and further enhance the adaptability of financial services to the real economy.
1. China's financial structure is undergoing profound changes
The financial structure can be measured from multiple dimensions, and the financing structure is the most important of them. For a long time, China's financing structure was dominated by bank loans, and the financial market was small. In recent years, the share of indirect financing, mainly bank loans, has continued to decline. The share of direct financing, including bonds and stocks, has been rising steadily, and the financial structure is undergoing profound changes.
In terms of increments, the combined increase in bond and stock financing has surpassed loans. Prior to 2013, China's new indirect financing accounted for more than 80% of the increase in the scale of social financing, which basically consisted of loans. In 2025, the scale of social financing increased by 35.6 trillion yuan, of which corporate bonds, government bonds and stock financing together accounted for about 47%, surpassing loans for the first time. In the past few years, under active fiscal policies, net financing of government bonds has increased, special debt has replaced hidden debts, and banks have stepped up efforts to write off non-performing loans, increasing the share of bonds and declining the share of loans. Even if these factors are removed, changes in China's financing structure are significant. Looking at corporate financing, the ratio between the increase in corporate bond financing and the increase in loans during the same period rose from 7% in 2023 to nearly 20% in the first half of 2026.
Judging from the stock, the share of direct financing has steadily risen to about 1/3. In the early stages of building a modern financial market system in the 1990s, indirect financing accounted for nearly 100% of the large-scale stock of social financing. As the financial market continues to develop steadily, at the end of June 2026, the share of indirect financing balance in social financing fell to about 2/3, and the share of loan balance fell to about 60%; the share of direct financing balance rose to about 1/3, and the share of bond financing rose to about 30%. China's financing structure has moved from being dominated by indirect financing to the coordinated development of direct financing and indirect financing.
In terms of capital investment, financial resources flow more to key areas and weak links. In the past 10 years, the share of new loans for real estate and infrastructure construction has dropped from more than 60% to about 10%, and the share of new loans in the “Five Major Articles” field of finance has risen to more than 70%. Over the past few years, the growth rate of technology-based SME loans has remained around 20%, and the average annual growth rate of inclusive small and micro loans is about 20%. Both green loans and pension industry loans have maintained double-digit growth, all significantly higher than the growth rate of all loans. The shift in the investment of credit funds shows that more financial resources are concentrated in key areas such as scientific and technological innovation, green development, and micro, small and medium-sized enterprises. This structural change is not necessarily reflected in an increase in loans, but it can improve the efficiency of capital use and inject new momentum into high-quality economic development.
Looking at the financial market, the market format is richer, and the depth and breadth are steadily increasing. Since the 18th National Congress of the Party, China's financial market has gradually evolved from being dominated by the credit market to a modern financial market system with the collaborative development of various financial sub-markets, including stocks, bonds, currencies, gold, notes, commodities, derivatives, etc., and the real economy has more diverse financing channels. In terms of the stock market, there are currently over 5,500 A-share listed companies, with a total market capitalization of over 110 trillion yuan, ranking second in the world. Among them, the number of “specialized, special and new” enterprises reached more than 2,000. In terms of the bond market, the balance of the interbank bond market was less than 500 billion yuan when it was established in 1997. Currently, the total size has exceeded 200 trillion yuan, ranking second in the world. Since the “technology board” of the bond market was launched more than a year ago, science and innovation bonds have been issued totaling about 3 trillion yuan, becoming an important source of medium- to long-term capital for technology-based enterprises.
II. The internal logic of changes in China's financial structure
Financial development and the stages of economic development are closely linked. The history of financial development in countries around the world shows that with the evolution of economic structures, financial activities have moved from focusing on total expansion to structural optimization, and the financial structure has moved from singular to diversified. The transformation of China's financial structure is not only a concrete expression of this general rule, but also has its own development logic and stage characteristics. It needs to be understood and grasped in the light of the reality of China's economic transformation.
First, changes in China's financial structure fundamentally reflect the dynamic evolution of the stage of economic development and the transformation of old and new economic growth momentum.
In the past, China's total financial volume grew rapidly, mainly related to the monetization process of the economy and the large-scale demand for money brought about by rapid growth. Since the reform and opening up, China has changed from mainly physical distribution in the past to monetary distribution. More and more commodities and housing are valued using currency, and transactions are carried out using currency as the medium. Demand for financing has also increased rapidly, and the total amount of finance has grown rapidly. Currently, China's economy has moved from a stage of rapid growth to a stage of high-quality development, and the monetization process has basically come to an end. Financial services to the economy are more reflected in structural optimization and improved adaptability, rather than the continuous expansion of total macrofinance volume. Judging from the mathematical relationship of total volume, the growth rate is the ratio of increment to total stock. The numerator is the current increment, and the denominator is the total stock. At present, China's social financing stock exceeds 460 trillion yuan, the general monetary balance exceeds 350 trillion yuan, and the loan balance exceeds 280 trillion yuan. The total scale of macrofinance is already very large. As stocks expand, it is natural that the growth rate of total finance has declined. This is consistent with the transformation in the stage of China's economic development.
The growth rate of total finance is slowing down, which is conducive to maintaining the basic stability of the macro leverage ratio. Over the past few years, China's macro leverage ratio has risen rapidly. On the one hand, macroeconomic policies have strengthened countercyclical adjustments to promote steady economic growth. The integration of total financial volume and debt growth has boosted the size of debt; on the other hand, prices are low, which has dragged down the nominal economic growth rate. The financing market is shifting from supply constraints to demand constraints. Effective financing requirements can be fully satisfied, and social financing conditions are still relatively relaxed. In this regard, it is necessary to balance the short-term and long-term relationships to prevent total financial growth exceeding the needs of the real economy, causing capital idling and accumulation, further boosting the macro leverage ratio, making it difficult for backward production capacity and inefficient enterprises to clear up, affecting economic efficiency.
Slowing down and improving the quality of loans may become one of the new normals of macroeconomic operations. Of the current loan balance of more than 280 trillion yuan, loans from real estate and local financing platforms still account for a large share. Not only are these sectors no longer growing, but they are also declining. From 2025 to the first half of 2026, the cumulative decline in real estate loan balances was more than 2 trillion yuan. Loans in other sectors must first make up for this decline in order to bring about an overall increase. With the transformation of the economic structure and changes in the credit structure, the credit growth required by the real economy is also changing. It is difficult and unnecessary for total credit to maintain the past growth rate. To support economic growth, the significance of revitalizing inefficient stock loans is essentially the same as adding new loans.
Second, changes in China's financial structure reflect the dynamic adaptation of the financial system and industrial structure transformation and upgrading.
In the past period, China's economic growth was mainly driven by real estate, infrastructure construction, and traditional manufacturing, showing the characteristics of intensive financing. These industries have large investment scales, long construction cycles, and sufficient collateral such as land and real estate. They have strong demand for medium- to long-term loans, and are more suited to bank-led financial systems. Banks have an advantage in financing traditional industries with mature technology and sufficient collateral. According to estimates, the ratio of medium- to long-term loan balances and industry value added in the traditional sector is greater than 1. Among them, the real estate industry and transportation industry are 1.7 and 3.3, respectively, which means that every 1 yuan of added value created requires more credit investment.
In recent years, emerging industries such as scientific and technological innovation, high-end manufacturing, and green and low-carbon industries have flourished. The industrial structure is shifting from traditional factor-intensive to technology-intensive, and financing requirements are becoming more “light”. In the first half of 2026, new momentum represented by high-end manufacturing contributed more than 40% to economic growth. These industries have characteristics such as large R&D investment, high risk and uncertainty, and long investment cycles. The form of enterprise assets has also changed more from land, plants, and equipment to technology, data, brands, and human capital. The asset-light industry generally corresponds to low debt, and relatively few bank loans are required per unit of economic growth. According to estimates, the ratio of medium- to long-term loan balances in the new kinetic energy sector to industry value added is generally less than 1, and the information service industry is only about 0.1, far lower than traditional industries.
Currently, science and technology innovation activities are complex and diverse, and are more compatible with diversified financing structures. Technology-based enterprises generally go through different stages such as seed period, start-up period, growth period, and maturity period. The risk characteristics and financial needs of each stage are very different, and they need to adapt to a rich and diverse financial market and financial ecosystem. In the early stages of growth, technology-based enterprises are mainly engaged in early R&D. The business prospects are uncertain. Private equity and venture capital are very important funding providers. By the mid to late stages, the business model gradually matured, and financing can be carried out through multiple channels such as bank loans, bonds, and equity. The financial market has an advantage in providing financing for innovative industries with cutting-edge technology, high risk and high return, leading to healthy alternatives and diversion of loans. This change will also become the norm, and the strength of financial support for the real economy cannot simply be measured by the rate of credit growth.
Third, changes in China's financial structure are an inevitable requirement for the high-quality development of the financial industry itself.
Judging from the financial industry's own development, it also requires transformation and high-quality development to enhance its adaptability to economic structural transformation. Since the reform and opening up, China has experienced large-scale financial risk management. Among them are reasons not only for economic system reform and economic structural transformation, but also for reasons related to inadequate financial structure and financial governance. For example, beginning in the 1980s, China changed from a planned economy to a market economy. A large number of enterprises went bankrupt, restructured, and merged, and large state-owned banks accumulated bad assets. The state-owned banks' own system also lags behind the needs of the real economy, further increasing the pressure on non-performing assets. In this context, the central government initiated the reform of state-owned banks, which took more than ten years. Another example is that after the 2008 international financial crisis, local government debt continued to expand, and economic growth was mostly driven by real estate. As a result, financial resources were concentrated in real estate, financing platforms, etc., which limited economic restructuring to a certain extent. Since the 18th National Congress of the Party, the central government has focused on restructuring and optimizing the financial system structure to deepen financial system reform, resolutely fighting to prevent and mitigate major risks. Financial risks have continued to subside, and the quality and efficiency of the high-quality development of financial services for the real economy has continued to improve.
To measure a country's financial competitiveness and the influence of an international financial center, the size of traditional financial institutions is certainly an important indicator; the degree of development, radiation capacity, and richness of the financial market is even more important. In the context of economic structural transformation, speeding up the development of the financial market is also an inevitable requirement for the financial industry's own transformation and high-quality development. Countries have different historical paths, bank-enterprise relationships, legal systems, etc., and there is no uniform model for financial structures. China's banking system will still account for some time to come, but as the economic structure changes, economic innovation becomes more active, and the complexity of economic activity increases, more attention needs to be paid to the coordinated development of direct financing and indirect financing, improving the structure of financial institutions, financial markets, and financial products, and making better use of the financial market functions.
3. Continuously optimize the high-quality development of the service economy with a financial structure
During the “15th Five-Year Plan” period, China's economic and financial development environment faced profound and complex changes. The “Fifteenth Five-Year Plan for Building a Strong Financial Country” was introduced recently, making systematic arrangements for financial work at present and in the coming period. In order to implement the relevant arrangements, the People's Bank of China formulated and issued the “People's Bank of China's Fifteenth Five-Year Plan for Reform and Development”, and has also issued nine action plans in related fields. It is necessary to adapt to the changing trend of China's financial structure, continuously optimize the financial structure, promote the gradual transformation and optimization of the policy framework, make the financial system more adaptable to the profoundly changing economic and financial structure, and create a favorable financial environment for high-quality economic development.
The first is to continue to push forward the transformation of the monetary policy framework and establish a scientific and sound monetary policy system. Continuously optimize the intermediate variables of monetary policy, reduce the focus on quantitative goals, especially on a single channel of loans, and use total financial volume more as an observational, reference, and predictive indicator. Pay more attention to giving full play to the role of price-oriented regulation and improving market-based interest rate formation, regulation and transmission mechanisms. Improve the short-term interest rate regulation mechanism, further optimize and improve policy interest rates and the construction of supporting systems, and enhance the central bank's role in policy interest rates. Improve interest rate pricing for deposits and loans, and provide business entities with more loan pricing benchmark options. Strengthen the implementation and supervision of interest rate policies, and continue to rectify “internal rolling” competition and capital idling in the financial industry. Improve credible, normalized, and institutionalized policy publicity and market communication mechanisms, and do a good job of policy communication and expectation guidance through professional and practical methods.
The second is to strengthen policy coordination and improve the quality and efficiency of financial services for key areas and weak links in the national economy. Strengthen the coordination of the “Five Major Articles” in finance, guide financial institutions to improve service capabilities, enrich financial products, strengthen information technology support, and optimize the allocation of financial resources. Accelerate the construction of institutional mechanisms compatible with scientific and technological innovation, explore open information sharing and integrated application of data in the field of technology finance, and enhance the effectiveness of financial support for scientific and technological innovation. Optimize the design and management of structural monetary policy tools, insist on focusing on key points, reasonable moderation, progress and retreat, and guide financial institutions to optimize capital investment through market-based incentives. Strengthen policy coordination, focus on financing guarantees, risk sharing, etc., and expand the effectiveness of policy incentives. Strengthen collaboration with industrial policies, guide financial institutions to scientifically assess risks, adopt classification policies, support and control, and curb “internal rolling” competition in some industries.
The third is to focus on the structural transformation and upgrading needs of the service economy and continue to build a standardized, open, dynamic, and resilient modern financial market. Build and develop a multi-category and multi-level financial market system to further enrich the financial market format. Develop a “technology board” for the equity market and bond market. Develop China's wealth management market to support the healthy and orderly development of the asset management industry. Promote the interconnection of financial market infrastructure, steadily develop interest rate and exchange rate derivatives, and promote market liquidity and price formation. Strengthen the benchmark role of treasury bond yield curves. Improve the legal system of the financial market, promote the optimization and improvement of systems such as issuance and transaction, registration and settlement, taxation, etc., maintain financial market order, and cultivate a good market ecology. Steadily promote the institutional opening up of the financial sector and further enhance the level of internationalization of the Chinese financial market. Build and improve a multi-channel, wide-coverage cross-border payment system. Coordinate the development of the offshore RMB market. Support Shanghai to enhance its capabilities in cross-border finance and offshore financial services. Consolidate Hong Kong's position as an offshore RMB business hub.
Fourth, improve the comprehensive macroprudential management system to further enhance the stability and resilience of the financial system. Grasp the dynamic balance of economic growth, economic restructuring, and financial risk prevention at the macro level. Safely mitigate risks in key areas. Continue to do a good job of mitigating the debt risks of financial support local government financing platforms. Promote risk mitigation in key regions and key institutions in a steady and orderly manner, and take financial regulations, market discipline and regulatory rules seriously. Improve the financial stability guarantee system. Strengthen the monitoring, assessment and early warning of systemic financial risks. Expand the central bank's macroprudential and financial stability functions, enrich the macroprudential management toolbox, and maintain the smooth operation of financial markets such as the stock market, bond market, and foreign exchange market.
This article was selected from the official website of “Qiushi.com”, editor of Zhitong Finance: Chen Siyu.