Pan Gongsheng: Including treasury bond trading in the monetary policy toolbox does not mean engaging in quantitative easing

On June 19, Pan Gongsheng, Governor of the People's Bank of China, said at the 2024 Lujiazui Forum today that the Central Financial Work Conference proposed to enrich the monetary policy toolbox and gradually increase the trading of treasury bonds in the central bank's open market operations. The People's Bank of China is strengthening communication with the Ministry of Finance to jointly study and promote implementation. The process as a whole is gradual, and the issuance rhythm, maturity structure, and custody system of treasury bonds also need to be studied and optimized simultaneously. It should be noted that the inclusion of treasury bond trading in the monetary policy toolbox does not mean quantitative easing, but positioning it as a basic monetary media buying channel and liquidity management tool, both buying and selling, and combining with other tools to jointly create a suitable liquidity environment. The rapid development of financial marekt has also brought new challenges to the central bank. The risk event of Silicon Valley Bank in the United States has inspired us that the central bank needs to observe and evaluate the situation of financial marekt from a macroprudential perspective, and timely correct and block the accumulation of financial marekt risks. At present, it is especially necessary to pay attention to the maturity mismatch and interest rate risk of medium and long-term bonds held by some non-bank entities, maintain a normal upward slope of the yield curve, and maintain the positive incentive effect of the market on investment.