The People's Bank of China (PBOC) recently convened its 2026 macroprudential work conference, outlining the core direction for the next phase of macroprudential management. The focus will be on continuously improving the working mechanisms of the macroprudential and financial stability committees, gradually expanding the scope of macroprudential policies, proactively assessing systemic financial risks, and innovating to enrich the policy toolkit. This announcement has sparked widespread market attention, fueling discussions about the potential creation of new monetary policy instruments by the central bank. China's macroprudential management has now formally entered a new paradigm characterized by "comprehensive coverage" and "ex-ante prevention," with the development of a liquidity support mechanism for non-bank financial institutions becoming a key topic of market focus.
Several experts interviewed indicated that this liquidity support mechanism is an emergency arrangement for "specific scenarios." The creation of such tools is a preemptive measure to guard against systemic financial risks, reflecting the forward-looking nature of macroprudential management.
Reviewing the evolution of China's macroprudential framework reveals a clear logical progression in policy development. From 2023 to 2024, the PBOC's policy focus was primarily on defensive regulation and preventing risks in key areas. This was achieved by optimizing the macroprudential stress testing mechanism and strengthening supervision of systemically important banks and financial holding companies to fortify risk defenses in critical sectors. In 2025, the PBOC held its first annual specialized macroprudential work conference, shifting the policy focus from singular risk defense to mechanism refinement and functional expansion, laying the groundwork for a comprehensive upgrade of the supervisory system. Entering 2026, the macroprudential work conference explicitly called for "gradually expanding the coverage of macroprudential policies," marking a phase of substantive implementation for the regulatory transformation.
Ming Ming, Chief Economist at CITIC Securities, stated that by comparing the content of past conferences, the current macroprudential management system is undergoing two core paradigm shifts. The first is an extension from a "single-sector" focus towards "comprehensive coverage," and the second is a transition from "ex-post governance" to "ex-ante prevention," with a growing emphasis on comprehensiveness, foresight, and innovation at the margin. The policy focus has expanded from regulating banks and key sectors to encompass broader financial markets, non-bank institutions, and cross-border capital flows. The policy thrust has shifted from preventing and resolving existing risks in key areas to proactively identifying potential vulnerabilities.
The inclusion of non-bank institutions into the core scope of supervision is underpinned by significant market logic. Non-bank financial institutions currently manage assets worth tens of trillions of yuan and play crucial trading roles in the bond market, stock market, and derivatives markets. Zhang Xu, Chief Fixed Income Analyst at Everbright Securities, noted that the primary risks in the bond market are interest rate risk, credit risk, and liquidity risk. Compared to banks, the non-bank financial sector is more susceptible to these risks. The contagion characteristic of interest rate risk is often accompanied by herd behavior. Credit risk contagion not only frequently involves herd effects but also sees higher participation from the non-bank financial sector, exhibiting strong sectoral characteristics. Given that the non-bank financial sector is more vulnerable to interest rate, liquidity, and credit risks in the bond market and plays an increasingly important role in the risk contagion process, Zhang Xu believes it is necessary to establish a mechanism for providing liquidity to non-bank institutions under specific scenarios.
Ming Ming predicts that future macroprudential management policies will cover more systemically important financial institutions based on the existing framework, while simultaneously strengthening monitoring of the impact of non-bank institutions and cross-border capital flows. "Gradually expanding the coverage" does not merely imply broadening the scope of regulated entities; it signifies an extension from the traditional banking system to non-bank institutions, financial markets, internet finance, and other areas, filling long-standing regulatory gaps and building a comprehensive, seamless risk prevention and control network.
As the macroprudential management system extends into the non-bank sector, market discussions about the "central bank potentially creating new monetary policy tools" have intensified, with "ONRRP-like tools" becoming a hot topic. Public information shows that the ONRRP is a tool formally launched by the U.S. Federal Reserve in 2013, after the 2008 financial crisis, to address excess market liquidity and prevent short-term interest rates from spiraling out of control. Unlike traditional interest rate tools that primarily affect commercial banks, its eligible counterparties include a wider range of entities, specifically non-bank financial institutions like money market funds. This allows the Fed's monetary policy to directly influence the entire shadow banking system, enhancing interest rate transmission.
Some investors speculate that the PBOC might draw on the Fed's experience to create an "ONRRP-like" tool for absorbing excess liquidity from non-bank entities. However, several interviewed experts stated that the probability of such a tool being implemented in China is low, primarily due to significant compatibility differences with China's financial market structure and liquidity framework. Zhang Xu pointed out that the original intention of the Fed in creating the ONRRP was to alleviate excessively abundant market liquidity and address the failure of the lower bound of the original interest rate corridor—essentially a measure of last resort. In China, the lower bound of the interest rate corridor is the excess reserve rate, and in recent years, the DR001 and R001 rates have never "breached" this lower bound. In his view, there is clearly no urgent need for China to create a similar liquidity absorption tool.
Ming Ming further analyzed from the perspectives of policy orientation and risk prevention, stating, "Given China's bank-centric system and the relatively small impact of the non-bank sector, the necessity for an ONRRP-like tool is low." He believes China's macro-control preferences lean towards targeted tools rather than universal ones. Incorporating non-bank risks into macroprudential assessments and establishing temporary support tools for times of market stress are more aligned with the domestic structure.
In practice, China's liquidity support mechanisms for non-bank institutions are already being explored and implemented. On October 27, 2025, PBOC Governor Pan Gongsheng announced at the 2025 Financial Street Forum Annual Conference that the central bank would balance maintaining stable financial market operation with preventing moral hazard, and would explore mechanism arrangements for providing liquidity to non-bank institutions under specific scenarios. This statement is a key reason for the recent heightened market focus on non-bank liquidity support tools.
Overall, the market perceives the liquidity support mechanism for non-bank institutions as an emergency arrangement for "specific scenarios," not a routine tool. Regarding the definition of "specific scenarios," Ming Ming suggested that quantitative measures could include market liquidity indicators, such as repo rates significantly deviating from policy rates, widening bond spreads, a sharp rise in non-bank financing costs, or a sharp contraction in financing scale. Qualitatively, it would involve situations like liquidity dislocation in the market, non-banks posing systemic risks, or conventional tools failing to alleviate pressure, requiring comprehensive judgment to avoid misuse.
Zhang Xu theorized that, during phases of financial market dysfunction, the central bank could provide funding support to non-bank financial institutions indirectly through methods like SPVs, or indirectly purchase bonds held by non-banks. Support could be targeted at individual institutions or an entire market segment, and the provided funds could be either non-recourse or recourse. These flexible and diverse tool designs can comprehensively address different types of risk scenarios.
A research report from Industrial Securities' fixed income team suggests that if the PBOC creates a liquidity provision tool targeted at non-bank institutions, its primary purpose would be to maintain financial stability. It would likely not be used frequently in daily operations. In terms of its creation purpose and mechanism, it might resemble the Fed's PDCF or SRF tools. Currently, the PBOC lacks tools to directly provide liquidity support to non-bank institutions in crisis mode, which could be an important direction for future reform.
Regarding future directions for tool innovation, Ming Ming predicts several possibilities. First, specialized liquidity facility tools for systemically important non-bank institutions, allowing them to obtain central bank liquidity by pledging high-liquidity assets under specific scenarios. Second, temporary liquidity support tools to provide short-term liquidity to non-banks during systemic market stress. Third, collateral expansion tools, such as allowing non-banks to use a wider range of assets as collateral.