PBOC’s Pan says will rely less on loan growth targets and more on rate tools to guide policy

People's Bank of China Governor Pan Gongsheng stated on Wednesday that the central bank will rely less on loan growth targets and more on interest rate tools to guide policy. He also pointed out that a decrease in total financial volume can help maintain stability in China's macro leverage ratio, which is the overall debt load relative to the economy.

The PBOC's primary monetary policy goals are to ensure price stability, including exchange rate stability, and to promote economic growth. China's central bank, owned by the state, is not autonomous and its management and direction are greatly influenced by the Chinese Communist Party Committee Secretary. Unlike Western economies, the PBOC utilizes a wider range of monetary policy instruments, such as the seven-day Reverse Repo Rate, Medium-term Lending Facility, foreign exchange interventions, and Reserve Requirement Ratio.

The central bank's benchmark interest rate, the Loan Prime Rate, directly impacts market loan and mortgage rates and savings interest rates. By adjusting the LPR, the central bank can influence the value of the Chinese Renminbi.