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Direct Financing in the Monetary Policy framework of People's Bank of China

In: Proceedings of the 2025 4th International Conference on Public Service, Economic Management and Sustainable Development (PESD 2025)

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  • Hongjia Liu

    (Menaul School)

Abstract

Since 2024, the monetary policy of China’s central bank has taken a turn, beginning to pay more attention to the direct financing market. Based on this phenomenon, this paper first discusses the reasons why the People’s Bank of China (PBoC) considers monetary policy during its implementation process, and then discusses how the PBoC takes direct financing into account in actual operations. Through research on China’s social financing structure and the central bank’s balance sheet, it is found that the proportion of direct financing in China’s social financing has increased in recent years, and at the same time, the central bank has also begun to engage in the buying and selling of government bonds, regulating direct financing and base money. Incorporating direct financing into the monetary policy framework is a common practice among central banks of various countries. In the future, the PBoC may further improve the supervision and reform of the direct financing market.

Suggested Citation

  • Hongjia Liu, 2025. "Direct Financing in the Monetary Policy framework of People's Bank of China," Advances in Economics, Business and Management Research, in: Qihui Chen & Nazrul Islam & Zulkiflee bin Mohamed & Yahua Xu (ed.), Proceedings of the 2025 4th International Conference on Public Service, Economic Management and Sustainable Development (PESD 2025), pages 49-58, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-916-2_7
    DOI: 10.2991/978-94-6463-916-2_7
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