Pan Gongsheng's Latest Remarks! Analyzing Global Economic Imbalances and Reiterating Foreign Exchange Market Stance

On March 22, during the China Development Forum 2026 Annual Meeting, Pan Gongsheng, Governor of the People’s Bank of China, elaborated on topics such as the sources of China’s industrial international competitiveness, how to view and analyze global economic imbalances, and ways to increase financial support for China’s economic restructuring.

Pan Gongsheng stated that the People’s Bank of China will continue to implement a moderately loose monetary policy. Currently, China’s social financing conditions are relaxed, and the total financial volume is growing reasonably. We will balance short-term and long-term considerations, support real economic growth while maintaining the health of the financial system, and manage internal and external equilibrium. We will use a variety of monetary policy tools such as reserve requirement ratios, policy interest rates, and open market operations to ensure ample liquidity.

Comprehensive Understanding of the Sources of China’s Industrial International Competitiveness

“China’s industrial international competitiveness has benefited primarily from over 40 years of reform and opening up. In opening up to the world, we learn from our international partners, including the excellent global companies present here today. We learn through competition and grow through learning,” Pan Gongsheng said when discussing the sources of China’s industrial competitiveness.

Meanwhile, he pointed out that large-scale markets, complete industrial and supply chains, abundant high-quality and skilled labor, especially technical talent, and continuous R&D investment leading to technological innovation all play crucial roles in enhancing China’s industrial competitiveness.

For example, the large market allows technological innovations to be quickly industrialized, scaled, commercialized, and iterated, creating technological leadership and cost advantages.

“Regarding the sources of China’s industrial competitiveness, some international perceptions still attribute it to unreasonable industrial subsidies provided by the Chinese government. If there are such doubts, visiting China more and observing firsthand can help develop a more accurate and comprehensive understanding of Chinese industry,” Pan emphasized. China advocates fair, healthy, and competitive markets. For some companies engaged in ‘involution’-style competition, the central government has taken measures to regulate local government investment promotion behaviors, banning unreasonable incentives like tax and land use benefits, and building a unified national market. The People’s Bank guides financial institutions to assess risks scientifically and to curb ‘involution’-style competition industries from a financial perspective.

Analysis of Global Economic Imbalances: The Five ‘Not Only… But Also…’

Regarding the current international discussion on global economic imbalances, Pan Gongsheng provided an in-depth analysis using five ‘Not only… but also…’ points.

To analyze global economic imbalances, one must look not only at merchandise trade but also at service trade; not only at current accounts but also at financial accounts.

“China is the world’s largest surplus country in goods trade and the largest deficit country in services trade. The surplus in China’s current account is invested abroad through enterprises and banks, allocating resources across different regions and industries globally, injecting liquidity into the global financial markets, and strongly supporting global economic development and financial stability,” Pan emphasized.

Analysis should be both static and dynamic.

From a temporal perspective, supply and demand balance is a relative concept. Whether globally or within individual economies, the gaps between supply and demand fluctuate due to various factors. For example, recent conflicts in the Middle East caused shocks to oil supply and a sharp rise in oil prices. However, over the longer term, market forces tend to self-correct, achieving dynamic supply-demand balance. Economic development, income growth, changes in consumer preferences, and technological progress all create new supply and demand patterns and new markets. Spatially, whether between countries or within regions, building a unified large market and engaging in division of labor and trade based on comparative advantages can maximize overall welfare.

“Looking back to the 1980s and 1990s when I studied economics at university, a basic consensus in the global economics community was that a free trade system based on comparative advantage is the foundation of global prosperity and helps enhance global well-being. International trade is not mandatory; it results from the voluntary choices of hundreds of millions of enterprises and households,” Pan said.

Analysis should encompass not only economic factors but also non-economic factors.

Pan noted that last year’s tariff and trade wars triggered a ‘race to export,’ and the broadening concept of national security led to increased export controls. These factors disrupted corporate and household expectations and caused significant disturbances to global economic balance.

Analysis should include not only the international trade system but also the international monetary system.

The trade surplus results from the evolution of global industrial division. Over the past 40 years, major surplus countries have generally been those with strong manufacturing competitiveness, such as Japan, Germany, Switzerland, and China. Recently, surplus has gradually shifted to emerging markets in Southeast Asia. However, the main deficit countries have remained unchanged, which is related to inherent flaws in the international monetary system.

“In a system dominated by a single sovereign currency, the issuing country of the main reserve currency can run deficits at lower financing costs, implementing long-term fiscal deficits and exporting currency through large current account deficits. Due to continuous capital inflows, this can lead to an overvaluation of the reserve currency, which in turn may weaken the manufacturing competitiveness of that country,” Pan explained.

He emphasized that stability, rationality, and predictability in cooperation are especially valuable today. The 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 order, and promote inclusive and equitable globalization.

China Accelerating to Become a Core Global Demand Market

Pan Gongsheng pointed out that China is actively promoting a transformation of its economic growth model to improve quality and sustainability. The 2026 government work report and the 14th Five-Year Plan clearly define the goals and main policies for the current and next five years. They set realistic economic growth targets while focusing on transforming growth methods.

Regarding growth targets, Pan explained that, mathematically, the growth rate is the ratio of annual GDP increase to the total GDP. By 2025, China’s GDP exceeded 140 trillion yuan, with annual increments equivalent to the total annual output of a medium-sized economy. China needs to maintain a reasonable growth rate, but the quality and sustainability of growth are more important. The government work report set this year’s growth target at 4.5%-5%, leaving more room for structural adjustments and high-quality development.

On transforming growth methods, Pan said that the 14th Five-Year Plan emphasizes high-quality development, strengthening the domestic cycle, and prioritizing domestic demand. Policies to boost consumption will be implemented, income distribution will be improved, social security systems optimized, and investments in education, healthcare, and elderly care expanded to significantly increase residents’ consumption rates. The development of the service sector will be vigorously promoted, along with reform, innovation, and opening-up in services. China aims to accelerate becoming a core global demand market based on its status as a major manufacturing power.

Pan stressed that dynamic economic balance and structural transformation require medium- and long-term reform plans and commitments, with firm implementation, rather than inconsistent ‘revolving’ policies. This year, China will implement the 15th Five-Year Plan. Formulating and continuously implementing five-year plans is an important experience and institutional advantage in China’s reform and development.

Enhancing Financial Support for China’s Economic Restructuring

To strengthen financial support for China’s economic restructuring, Pan Gongsheng said the People’s Bank of China will adhere to a supportive monetary policy stance, creating a favorable monetary and financial environment for stable growth, high-quality development, and smooth financial markets.

According to IMF classification standards, China operates a managed floating exchange rate system. 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 basically stable at a reasonable and balanced level. Through transparent, rule-based macroprudential management and expectation guidance, the People’s Bank aims to correct herd behavior and market failures, helping prevent destructive imbalances seen repeatedly in international financial history.

He noted that the People’s Bank will steadily promote high-level opening of the financial sector. Deepening financial market connectivity and cross-border payment systems will facilitate more investors to participate in China’s financial markets. China’s stock and bond markets are both the second largest in the world, with increasing depth, resilience, and liquidity.

In recent years, the internationalization of the RMB has made positive progress, offering more diverse currency options for domestic and foreign entities. Pan said that currently, the cost of RMB financing is relatively low. By 2025, over 170 billion yuan in panda bonds will be issued by governments, international development agencies, financial institutions, and large enterprises, with offshore RMB bonds issued in Hong Kong being even larger. China will continue to improve cross-border RMB usage systems and financial infrastructure, promote diversified currency cooperation, and develop offshore RMB markets to facilitate cross-border trade and investment activities.