On June 21, at the 2025 Mid-term Forum (Total 69th) of the China Macroeconomic Forum (CMF) of Renmin University of China, Li Yang, member of the Chinese Academy of Social Sciences and chairman of the National Finance and Development Laboratory, delivered a speech entitled "The Continuously Enriched Chinese Monetary Policy Toolbox".
Li Yang said that from three aspects, the current environment for formulating and implementing monetary policy is becoming increasingly complex.
First, domestic effective demand is insufficient, prices are sluggish, and expectations are weak. There is still pressure in promoting economic growth, advancing scientific and technological progress, and improving income distribution.
Second, the "great changes unseen in a century" in the world are accelerating, the process of globalization has stagnated, geopolitical tensions have emerged, and the world pattern has entered a fragmented, multipolar and bilateral world, whether it is international economy, international trade or international finance.
Furthermore, stablecoins have passed the legislative process in Europe, the United States, and Hong Kong, making the challenges posed by digital technology to the current currency, finance, monetary and financial policies, and even monetary and financial theories explicit.
Public information shows that the EU Crypto-Asset Market Regulation Act (MiCA) will officially come into effect on December 30, 2024, directly regulating electronic currency tokens (such as euro stablecoins), asset reference tokens (anchored to a basket of assets, including commodities, crypto assets, etc.), and other crypto assets. Recently, the U.S. Senate passed the Guidance and Establishment of a National Innovation for Stablecoins in the United States (GENIUS Act), establishing the first federal regulatory framework for stablecoins, and the Trump administration is pushing for its implementation before August. In addition, on May 21, the Legislative Council of the Hong Kong Special Administrative Region of China also passed the Stablecoin Bill, providing the first complete and clear regulatory framework for the issuance of stablecoins. The Stablecoin Bill will officially come into effect on August 1.
Li Yang specifically pointed out that although there are many types of virtual currencies, only stablecoins have entered the legislative process, which needs to be highly valued. Stablecoins have significantly different theoretical foundations and operating characteristics from traditional currencies, and will pose new challenges to the traditional monetary and financial system.
The current monetary policy tone tends to be loose, and the money supply is growing, but the growth rate of M2 is still higher than that of M1, indicating that the monetary policy transmission mechanism is still blocked by the lack of confidence of residents and enterprises. Li Yang analyzed that the downward trend of interest rates may become the norm of my country's financial operation in the future, and responding to the challenge of low interest rates will also become one of the main tasks of my country's financial industry.
Talking about the response methods, Li Yang gave several suggestions.
First, intermediary institutions such as banks must transform. Commercial banks should vigorously develop financial services, develop asset management business, strengthen asset trading business, and promote integrated operations. Non-bank financial institutions should also transform, and the development of the capital market is crucial.
Second, the policy adjustment target should pay more attention to financial stability, and monetary policy should gradually shift to focus on regulating liquidity. In terms of operation, the role of the central bank should also shift from "lender of last resort" to having both "lender of last resort" and "market maker of last resort" functions.
Third, there is still room for the deposit reserve ratio to fall. Since the 1990s, the deposit reserve ratio has been regarded as an administrative regulation method and has gradually been abandoned by market economies. Many countries have begun to implement a "zero reserve ratio". The room for lowering the deposit reserve ratio in my country is also the flexibility of China's monetary policy.
Fourth, incorporate asset price stability into the monetary policy perspective. The current trend of global monetary policy is to focus not only on price stability but also on asset price stability. China's monetary policy should also keep pace with the times and explore normalized institutional arrangements to maintain capital market stability.
Fifth, actively participate in the reform of the international monetary and financial governance mechanism. The current international monetary system may continue to evolve towards a pattern of coexistence, mutual competition and mutual checks and balances of several sovereign currencies. China should actively promote the diversified development of the cross-border payment system, adhere to the path of reform and opening up and multilateralism, actively play a constructive role, and contribute to building a more fair, just, inclusive and resilient global financial governance system.
Sixth, respond positively to the development of digital currency and stable currency. my country has confirmed that emerging technologies such as blockchain and distributed ledgers have promoted the vigorous development of central bank digital currencies and stablecoins, realized "payment is settlement", reshaped the traditional payment system from the bottom up, greatly shortened the cross-border payment chain, and posed huge challenges to financial supervision. Technologies such as smart contracts and decentralized finance will also continue to promote the evolution and development of cross-border payment systems.
"Before taking office for the second time, Trump said that he would turn digital currency into national wealth, and also made it clear that he would not engage in central bank digital currency. Our country's attitude towards this is completely opposite. We promote central bank digital currency, but we don't engage in digital currency." Li Yang said that the current global trend is that Bitcoin and stablecoins are popular, so we must immediately answer the question of "what to do".
For the rapidly expanding crypto asset market and the regulatory framework related to climate risks, global regulatory coordination is insufficient, the regulatory orientation swings sharply and is too strongly driven by politics; the application of artificial intelligence in the financial field lacks unified regulatory standards, and the world needs to strengthen coordinated supervision to make up for regulatory shortcomings.
Recently, China decided to set up a digital RMB international operation center in Shanghai to promote the international operation of digital RMB and the development of financial market business, and serve digital financial innovation. Li Yang pointed out that Chinese regulatory authorities have made arrangements on how to deal with the problems brought about by digital currencies such as stablecoins. China will not lag behind, and our policy toolbox will continue to be enriched to ensure the steady and long-term development of China's macro-economy.
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