China's central bank is preparing a significant overhaul of its monetary policy framework, with a focus on refining targets, tools, and transmission mechanisms to better support the nation's economic transformation. During a State Council Information Office press conference on September 10, the People's Bank of China's Deputy Governor Lu Lei detailed the strategic priorities for the upcoming 15th Five-Year Plan period.

Under the new strategy, the central bank will firmly prioritize currency stability as a foundation for driving economic growth, while simultaneously increasing its support for high-quality development in the real economy. A key shift will involve a gradual reduction in the reliance on quantity-based intermediate targets, with a stronger emphasis on leveraging interest rate adjustments as a primary policy tool.

According to Lu Lei, the reserve requirement system will be refined, and open market operations will be executed with greater flexibility and precision, alongside continuous improvement to the base money supply mechanism. The central bank plans to strengthen the market-oriented interest rate formation and transmission system by enhancing the guiding role of policy rates, ensuring smoother fluctuations in short-term money market rates, and clearing the transmission pathway from policy rates to benchmark rates and ultimately to various market interest rates.

The framework will also feature an optimized structural monetary policy toolkit, with improved design and management of policies aimed at boosting the quality and efficiency of financial services for the real economy.

Addressing exchange rate policy, Lu Lei confirmed the continuation of the managed floating exchange rate system, respecting the market's decisive role in rate formation while guarding against herd behavior and self-reinforcing irrational expectations. He firmly stated that China neither needs nor intends to gain a trade advantage through currency depreciation, citing the growing bargaining power of exporters and their enhanced capacity to manage exchange rate risks as key factors that have diminished the economy's sensitivity to currency fluctuations. The increased use of hedging tools and the rising share of the yuan in trade settlements further insulate commerce from exchange rate volatility.

Regarding communication and execution, the central bank is committed to advancing more credible, standardized, and institutionalized policy communication mechanisms. This initiative aims to enhance the comprehensibility and authority of its communications, improve expectation management, and foster better policy coordination across macroprudential and fiscal domains to achieve a dynamic equilibrium among multiple policy objectives.

In summary, the gradual modernization of China's monetary policy framework during the 15th Five-Year Plan period is designed to better align with the country's evolving economic and financial landscape. This transformation is poised to facilitate more effective macroeconomic regulation and robust support for the real economy, cultivating a conducive monetary and financial environment for high-quality growth.