On September 22, at a press conference under the State Council Information Office's (SCIO) themed series on “High-Quality Implementation of the 14th Five-Year Plan”, the People’s Bank of China (PBOC) Governor Pan Gongsheng stated that since the start of the 14th Five-Year Plan period, China has made significant achievements in preventing and resolving financial risks. Financial regulatory authorities have handled a number of prominent risks in the financial sector in an orderly manner, effectively contained the spillover and impact of external shocks on China’s financial markets, and strongly protected the interests of depositors and small and medium-sized investors. Currently, China’s financial system is generally sound with financial institutions overall healthy and financial markets functioning smoothly. Focusing on topics such as the achievements and experience in building the financial stability safeguard system during the 14th Five-Year Plan period, and subsequent measures, a Financial News reporter recently conducted an exclusive interview with the head of the Financial Stability Bureau of the PBOC.
Financial News: During the 14th Five-Year Plan period, what measures has the PBOC taken to strengthen the financial stability safeguard system? What results have been achieved?
Head of the Financial Stability Bureau of the PBOC: The financial sector is one that operates and manages risks while risk prevention and resolution is an eternal theme of financial work. Strengthening the financial stability safeguard system is of great significance for preventing and resolving financial risks and accelerating the building of China into a financial powerhouse.
During the 14th Five-Year Plan period, in accordance with the decisions and arrangements of the Communist Party of China Central Committee and the State Council, the PBOC, following the principles of “ensuring overall stability, taking a coordinated approach, adopting differentiated measures, and defusing bombs with precision”, worked with relevant authorities to wage the battle of preventing and resolving major financial risks, strengthened the financial stability safeguard system, safeguarded financial stability and national financial security, and provided strong support for the sound development of the financial sector.
On one hand, major financial risks, such as those involving key high-risk conglomerates, were addressed in a targeted and effective manner. Risks associated with shadow banking, and illegal financial activities were comprehensively rectified. Financial regulation and governance were strengthened, the fight against financial corruption was continuously intensified and various financial irregularities were effectively curbed. The tendency of the financial sector to divert from the real economy and engage in reckless expansion were fundamentally reversed, and financial markets remained generally stable and orderly.
On the other hand, substantial progress has been made in building long-term mechanisms, with the institutionalization and legalization of financial risk prevention and resolution continuously advanced. Significant progress has been made in financial stability legislation. The Financial Stability Law (Draft) has been deliberated by the Standing Committee of the National People’s Congress (NPC) and has undergone public consultation. The PBOC’s Macro-prudential and Financial Stability Committee was established. It conducts central bank ratings and stress tests for financial institutions, continuously improve the system for monitoring, assessing and providing early warnings of financial risks, and explore ways to expand the central bank’s macro-prudential and financial stability functions. Positive progress was made in the development of the deposit insurance system and the Financial Stability Guarantee Fund. Since 2015, China’s deposit insurance mechanism has operated in a stable and orderly manner, with the level of protection remaining consistently high. As of end-June 2025, there were 3,554 insured institutions across the country. The compensation limit of RMB500,000 provides full protection to over 99 percent of depositors. Since the launch of the deposit insurance logo in 2020, public communication on deposit insurance has become a regular practice, with public awareness and credibility significantly enhanced. The mechanism charges risk-based differentiated premiums to encourage prudent operations by rewarding sound institutions and penalizing those with weaker performance. By requiring insured institutions to take prompt corrective actions such as replenishing capital and controlling asset growth, the mechanism has helped facilitate the initial resolution of risks for hundreds of institutions. At the same time, the deposit insurance has actively leveraged its market-oriented and law-based resolution functions, providing strong support for several key institutions in defusing risks. Since 2021, the PBOC has taken the lead in establishing the Financial Stability Fund, which serves as a central reserve fund to address major financial risks. In its daily operations, the Fund is raised and managed through the existing Deposit Insurance Fund management institutions and industry guarantee fund management institutions. At present, the Fund has accumulated a certain amount of capital.
Currently, China’s development environment is undergoing profound and complex changes, and the financial sector is facing multiple challenges. Going forward, the PBOC will continue to reinforce the financial stability safeguard system, enhance the specialized role of deposit insurance in financial risk resolution, expand the sources of funding for risk resolution, and further consolidate the institutional foundation for the sound operation of the financial sector. The PBOC will firmly defend the bottom line of no systemic financial risks, providing strong support for the overall economic and social development.
Financial News: Regarding the requirement of “early identification, early warning, early exposure, and early resolution” proposed at the Central Financial Work Conference, how has the PBOC implemented it in practice? What progress has been achieved so far?
Head of the Financial Stability Bureau of the PBOC: General Secretary Xi Jinping emphasized at the Central Financial Work Conference that, in preventing and resolving financial risks, it is essential to properly balance the relationship between prevention and resolution. The key lies in taking proactive measures—addressing potential risks before they occur, and strengthening front-end governance—to ensure early identification, warning, exposure, and resolution of risks. The “Four Earlies” approach represents China’s successful experience in preventing and resolving major risks of all kinds. In practice, timely intervention at the early stages of financial risk formation can effectively reduce the cost of risk resolution. During the 14th Five-Year Plan period, the PBOC, together with relevant authorities, has moved the risk prevention and control gateway forward, continuously improving the systems for financial risk monitoring, early warning, and assessment.
First, efforts have been stepped up to strengthen financial risk early warning. Financial risks are often traceable, which are usually reflected in abnormal changes in certain monitoring indicators. The PBOC has made comprehensive use of tools such as central bank ratings and stress testing to continuously refine its risk identification indicators. By analyzing abnormal data, the PBOC has identified emerging risks and promptly alerted financial institutions.
Second, the PBOC has worked to improve the mechanism with hard constraints for ensuring early corrections of financial risks. In close coordination with financial regulatory authorities, the PBOC has established a normalized mechanism with hard constraints for ensuring early risk corrections. For high-risk institutions, clear deadlines and specific rectification requirements have been set, while effective linkage between early correction and risk resolution has been ensured to prevent risks from escalating or spreading.
Third, measures have been taken to orderly reduce the number of existing high-risk institutions. Financial regulatory authorities have supported local governments in resolving existing risks through multiple approaches, including on-site remediation, mergers and restructurings, and market exits. As a result, the number of high-risk small and medium-sized banks has dropped significantly from the peak in 2019.
Fourth, close attention has been paid to the interconnection and contagion among various types of financial risks. The PBOC, in collaboration with relevant departments, has further strengthened risk monitoring across different types of financial institutions and markets, enhanced the application and sharing of monitoring results, and worked to prevent the superposition and resonance of financial risks.
Financial News: Looking ahead, how will the PBOC strike a balance between stabilizing growth and preventing risks while coordinating development and security?
Head of the Financial Stability Bureau of the PBOC: Development and security are two wings of an integrated whole—development is the goal of security, while security is the guarantee of development. In recent years, the PBOC has adhered to the general principle of pursuing progress while ensuring stability, intensified financial support for the real economy, and prudently and orderly advanced the risk resolution in key areas such as real estate, local government debt, and small and medium-sized financial institutions. During the 14th Five-Year Plan period, China’s financial risks have remained generally controllable, contributing to the overall sound operation of financial institutions. Financial markets have operated smoothly, providing strong support for high-quality economic development.
While recognizing these achievements, it is also important to note that China’s economic performance still faces multiple risks and challenges. It is therefore essential to accurately assess the situation, maintain bottom-line thinking, and strike a proper balance between stabilizing economic growth and preventing risks.
First, it is important to view the relationship between economic and financial risks from a macro perspective. The economy serves as the foundation of finance, and many problems in the economic sector often manifest and spill over through financial channels. In practice, attention should be paid not only to the individual risks of financial institutions at the micro level, but also to maintaining a dynamic balance among economic growth, economic restructuring, and financial risk prevention at the macro level. Following the principle of seeking progress while maintaining stability and promoting stability through progress, the PBOC will strengthen counter-cyclical adjustments to policies. By leveraging the certainty of high-quality development to address the uncertainties of various risks and challenges, it will firmly defend the bottom line whereby no systemic risks will occur.
Second, risks should be addressed prudently based on market principles and the rule of law. It is necessary to strengthen market discipline, respect market laws, and continuously improve the accountability mechanism for risk resolution that matches power with responsibility and ensures compatibility between incentives and constraints. All parties will be urged to fully perform their duties and obligations, effectively protect the legitimate rights and interests of stakeholders, and strictly guard against risk spillovers and moral hazards. Full play should be given to the core functions of the Deposit Insurance Fund, including preventing bank runs, implementing differentiated premium rates, enforcing early corrections, and supporting risk resolution.
Third, efforts will be made to explore and expand the PBOC’s macro-prudential and financial stability functions, and to enrich the policy toolkit for maintaining financial stability. China will gradually bring major financial activities, financial markets, and financial infrastructures under the scope of macro-prudential management, and strengthen the coordination between macro-prudential management and micro-prudential supervision. The PBOC will also work to enhance its capacity for financial risk monitoring, early warning, and assessment, improve the systemic risk assessment and identification mechanism, and continuously strengthen and consolidate the financial stability safeguard system.
