Pan Gongsheng's Latest Statement: China Does Not Rely on Currency Depreciation to Gain Trade Competitive Advantage, Monetary Policy to Continue "Moderately Loose"

Source: Beike Finance

On March 22, the China Development Forum was held in Beijing. People’s Bank of China Governor Pan Gongsheng delivered a speech titled “High-Quality Development in China and Global Economic Rebalancing.” In his speech, Pan detailed the sources of China’s industrial international competitiveness.

“The People’s Bank will adhere to a supportive monetary policy stance, creating a favorable monetary and financial environment for stable economic growth, high-quality development, and smooth financial market operation,” Pan emphasized. He stated that China’s central bank will continue to implement a moderately easing monetary policy. China has neither the need nor the intention to gain a trade advantage through currency devaluation. Additionally, China will steadily promote high-level opening of the financial sector.

China’s industrial competitiveness stems from technological innovation and other factors

Currently, geopolitical and trade conflicts are frequent, and the global economy has experienced three major dynamic balancing processes, to which China has actively contributed. In recent years, China’s rising industrial international competitiveness, according to Pan Gongsheng, is largely due to over 40 years of reform and opening-up.

“Some international perceptions still believe that China’s industrial support policies are unreasonable subsidies,” Pan said frankly. He encouraged skeptics to visit China more often and observe firsthand, which can help the international community gain a more accurate and comprehensive understanding of Chinese industries.

He identified four key factors that significantly enhance China’s industrial competitiveness. First is the enormous domestic market, where technological innovations can be quickly industrialized, scaled, commercialized, and iterated, leading to technological leadership and cost advantages. Second is a complete industrial and supply chain system, with efficient clustering and division of labor in industrial ecosystems, supply networks, R&D institutions, and digital infrastructure in certain regions. Third is a rich, highly skilled, and diligent workforce, especially technical talent. Fourth is the continuous investment in R&D, which boosts technological innovation. Over the past five years, China’s R&D expenditure has grown at an average annual rate of over 10%. By 2025, China’s total R&D spending will rank second globally, after the United States; R&D intensity (R&D expenditure as a percentage of GDP) exceeds the OECD average.

Furthermore, Pan believes that stable, rational, and predictable cooperation is especially valuable today. Fragmentation of trade is undermining the foundation of free trade. We need to more firmly oppose all forms of trade protectionism, strengthen and develop a multilateral framework centered on the World Trade Organization and rule-based international economic and trade order, and promote inclusive and equitable globalization.

China is actively promoting a transformation of its economic growth model, with medium- and long-term reform plans and commitments

Currently, China is actively pushing for a transformation of its economic growth model to improve quality and sustainability. The two sessions approved the 2026 government work report and the 14th Five-Year Plan outline, which clearly define economic and social development goals and major policies for this year and the next five years.

In Pan Gongsheng’s view, these set realistic and reasonable growth expectations; focus on transforming the growth model; emphasize technological innovation to boost productivity; accelerate green transformation and sustainable development; and further improve economic governance—all noteworthy features.

Regarding technological innovation, Pan pointed out that it is China’s clear and steadfast long-term strategic choice, aligning with global technological revolution trends and China’s high-quality development needs. China will continue to promote deep integration of technological and industrial innovation, strengthen intellectual property protection and application, and enhance productivity.

“Achieving dynamic economic balance and structural transformation requires medium- and long-term reform plans and commitments, and firm implementation, rather than constant back-and-forth ‘revolving’ policies,” Pan said. This year, China will implement the 14th Five-Year Plan. Developing and continuously implementing five-year plans is an important experience and institutional advantage in China’s reform and development.

Continuing to implement a moderately easing monetary policy, China has no need to devalue its currency to gain trade advantages

Pan Gongsheng reiterated that the People’s Bank will maintain a supportive monetary policy stance, creating a favorable environment for stable growth, high-quality development, and smooth financial markets.

“The central bank will continue to implement a moderately easing monetary policy,” he said. Currently, China’s social financing conditions are relaxed, and the total financial volume is growing reasonably. The PBOC will balance short-term and long-term considerations, support real economic growth while maintaining the health of the financial system, and use tools such as reserve requirement ratios, policy interest rates, and open market operations to ensure ample liquidity.

Regarding the exchange rate, Pan emphasized that China has neither the need nor the intention to devalue its currency to gain trade advantages. The People’s Bank’s stance remains clear: market forces should play a decisive role in exchange rate formation, maintaining exchange rate flexibility, while guiding expectations and keeping the RMB exchange rate stable at a reasonable and balanced level.

According to IMF classification standards, China operates a managed floating exchange rate system. Since the beginning of the year, the RMB has appreciated about 1.3% against the US dollar, 3.7% against the euro, 3.2% against the yen, and 2.4% against the British pound.

Pan Gongsheng stated that the PBOC’s expectation guidance and the use of transparent, internationally aligned macroprudential tools help correct herd behavior and market failures, preventing destructive imbalances that have repeatedly occurred in international financial history.

Additionally, Pan noted that the central bank will steadily promote high-level opening of the financial sector. This includes deepening financial market connectivity, cross-border payment systems, and facilitating more investors to participate in China’s financial markets. China will also actively participate in and promote reforms of global financial governance, strengthen international macroeconomic policy communication and coordination, improve governance of international financial organizations, and build a diverse, efficient global financial safety net to better safeguard global economic and financial stability.

Beijing News Beike Finance Reporter: Jiang Fan

Editor: Yue Caizhou

Proofreader: Zhang Yanjun