CNBC:

Analysts say that the reason why the Chinese government bond yield has declined is because of expectations that the economy will slow further and that monetary policy will ease. What is the People's Bank of China's view on this, and what measures do you plan to take? Thank you.

Pan Gongsheng:

The debate surrounding this issue has subsided recently. Previously, there was extensive discussion, and the PBC communicated frequently with the market in appropriate ways. The decline in the yield of China's government bonds was attributed to various reasons. For instance, the PBC used policy interest rates to guide the market toward lowering its rates; the issuance and supply of treasury bonds slowed; and some small- and medium-sized financial institutions in the market lacked risk awareness and swarmed to the market, creating the effect of herd flock and exacerbating the situation. Currently, China's long-term treasury bonds have a yield rate of around 2.1%. This is the result of market-oriented development, and the PBC respects the market's role. At the same time, this has undoubtedly created a conducive monetary environment for implementing proactive fiscal policies.

However, we must also recognize that interest rate risk is a crucial aspect of financial institutions' risk management. The case of Silicon Valley Bank (SVB) is particularly instructive. As everyone is aware, this risk event reminds us that central banks need to observe and assess market risks from a macroprudential management perspective and take appropriate measures to mitigate and prevent risk accumulation. This is an essential responsibility of central banks.

Currently, as a key price indicator, the yield curves of government bonds still face problems such as insufficient long-end pricing and lack of stability. The central bank has issued risk warnings on the yields of long-term government bonds and strengthened communication with the market. These measures aim to prevent potential systemic risks of a one-sided decline in long-term government bond yields incurred by the effect of herd flock.

It is the central bank's responsibility to maintain a sound trading order in the bond market. Recently, the PBC identified several violations in the bond market such as price manipulation, account lending, and improper interest transfers. We will intensify investigations and penalties for violations of laws and regulations in the interbank bond market, disclosing findings to the public when appropriate. The National Association of Financial Market Institutional Investors (NAFMII) has already publicly released several cases. Ongoing investigations continue, and we will announce the results once they are completed.

In recent years, as China's financial market develop rapidly, the bond market has gradually improved in size and depth. Conditions have become increasingly suitable for the central bank to purchase and sell government bonds and issue base currency through the secondary market. I elaborated on our plans regarding this matter at the Lujiazui Forum on June 19. The PBC has already incorporated government bond purchases and sales into its monetary policy toolkit and has begun trial operations. The specific measures in this regard are fully transparent and have been published publicly on the PBC's website. We are also collaborating with the Ministry of Finance (MOF), jointly working on measures to optimize the issuance pace, maturity structure, and custody system of government bonds. The PBC's process of purchasing and selling government bonds in the secondary market will be progressive.

Thank you.