The evolution of financial structure and the modernization of financial markets in China

1. Six new measures

At the Lujiazui Forum in Shanghai, in front of Vice Premier He Lifeng and city leaders, the Governor of the People's Bank of China announced a package of measures. The bank will refine its short-term rate framework: the ad hoc overnight repo window will be set within a quarter point above or below the seven-day policy rate, narrowing the band from 70 to 50 points, and overnight reverse repos may be added to open market operations. A renminbi repo facility will let foreign central banks, international institutions and sovereign funds borrow yuan against high-quality bonds such as Chinese government debt. Six large banks will pilot offshore yuan-foreign exchange trading in the Shanghai free trade zone. The bank is studying an emergency liquidity backstop for non-bank financial firms, provided through swaps only in systemic market stress and conditioned on prudential rules and top-grade collateral to limit moral hazard. An action plan for offshore finance in Shanghai, a central repository of interbank trading and settlement data, an international e-CNY operations centre and a cross-border e-CNY transfer platform complete the list.

2. From banks to markets

China's financing has long relied on bank loans, but this is changing. In 2025, bonds and shares together provided 47% of new financing to the real economy against 45% for loans, the first time markets overtook credit. In the stock of financing, the bank share has fallen from almost all in the 1990s to about two-thirds. Over ten years, property and infrastructure have dropped from over 60% of new loans to about 10%, while five priority areas now take over 70%. Lending to small technology firms grows about 20% a year, technology bonds have reached about 2.6 trillion yuan, and the value of the innovation-focused boards rose nearly 50% in 2025.

3. Why the shift is lasting

Financing to the economy exceeds 450 trillion yuan and broad money 350 trillion, so further rapid expansion is neither easy nor needed. Loans to property and local government vehicles are shrinking, and using existing credit better matters as much as adding new credit; slower but better-allocated lending may become normal. Growth used to rest on property, infrastructure and heavy industry, which borrow long against solid collateral. New sectors in technology, advanced manufacturing and green industry invest in research and intangible assets, carry higher risk and need less bank debt, so start-ups depend on venture and private equity before turning to loans, bonds and shares. China therefore needs diverse markets alongside better-targeted bank credit.

4. Markets built over three decades

China now has a full range of markets, from shares and bonds to gold, commodities and derivatives. Listed companies have grown from eight in Shanghai in the early 1990s to 5 500 worth over 110 trillion yuan, and bonds outstanding from under 500 billion in 1997 to more than 200 trillion, both second worldwide. Currency trading covers over 40 currencies and more than $42 trillion a year. Access schemes and connections with Hong Kong have brought foreign holdings of onshore yuan assets above 10 trillion, and Chinese securities are in major global indices.

5. Five priorities

During the 15th Five-Year Plan, the bank will widen the range of markets and products, including technology boards, long-term investment, asset management and green bonds; deepen market pricing, the government bond yield curve and careful development of rate and currency derivatives; strengthen the legal framework, default resolution and the integrity of underwriters, raters, auditors and lawyers; enlarge macroprudential tools for currency, stock and bond markets to contain contagion; and open further, improving connection schemes, panda bonds, cross-border payments and offshore yuan supply, while supporting Hong Kong as the offshore yuan hub and preventing systemic risk.