At the 2026 Lujiazui Forum, Pan Gongsheng, Governor of the People’s Bank of China, announced that they are studying the establishment of “Specific Non-Bank Liquidity Support Tools” to provide precise liquidity support to brokerages and funds, bypassing traditional banking channels. This move has sparked high market attention, reflecting official concerns about the deep-rooted crisis in the non-bank financial system and signaling that China’s financial sector is accelerating into a high-risk zone.
On June 17, Pan Gongsheng announced six financial policy measures at the 2026 Lujiazui Forum, including the creation of overseas central bank repurchase tools and the launch of pilot offshore renminbi foreign exchange trading. Among these measures, the study to establish “Specific Scenario Non-Bank Liquidity Support Macro-Prudential Tools” has drawn particular market focus.
Pan Gongsheng stated that in cases where systemic pressures emerge in markets like bonds, causing disruptions in normal liquidity channels and institutions collectively facing liquidity crises, potentially triggering systemic risks, the central bank will provide emergency liquidity to non-bank institutions through swap arrangements.
The so-called “Specific Scenario Non-Bank Liquidity Support Macro-Prudential Tools,” in simple terms, are not intended to rescue a single institution in crisis, but to prevent risks from spreading throughout the entire financial system as a “quarantine measure.”
This tool primarily targets non-bank financial institutions such as securities firms, fund companies, and insurance companies. When these institutions collectively face a liquidity collapse under specific circumstances, the central bank will activate special mechanisms to provide funds through “asset swap (collateral)” to assist institutions in bridging emergency debt gaps and stopping market bleeding in a timely manner.
Professor Sun Guoxiang of the Department of International Affairs and Business at Nanhua University in Taiwan, analyzed that this financial tool highlights the central bank’s sense of being the “last resort” when facing future financial risks. This shows that the People’s Bank of China has realized that the transmission center of financial risks in China is shifting from the traditional banking system to the non-bank sectors such as debt market, asset management, funds, brokerages, and insurance.
However, institutions applying to use this “special measure” will not be without costs. Pan Gongsheng emphasized that the mechanism will integrate considerations of “maintaining market stability” and “preventing moral hazards.” The term “Specific Scenario” means that the mechanism will not provide normal liquidity support to non-bank institutions; while “preventing moral hazards” means that applying institutions must meet macro-prudential regulatory requirements and provide high-quality collateral during operations.
Sun Guoxiang believes that Pan Gongsheng has clearly defined the eligibility and costs of usage, indicating that it is not an unconditional market bailout, but rather the central bank preparing to establish a mechanism similar to a last liquidity defense line.
In fact, this policy concept is not new. Pan Gongsheng had already signaled at the 2025 Financial Street Forum Annual Meeting that the People’s Bank of China would explore arrangements to provide liquidity to non-bank institutions under specific scenarios while balancing market stability and moral risks.
Sun Guoxiang further analyzed that the central bank’s introduction of this tool is set against the backdrop of China’s current economy facing weak domestic demand, pressure on investments and real estate, and undergoing structural transformation pains.
During this transformation, the rapid expansion of non-bank financial products in recent years has led to easily amplified liquidity risks through institutional behaviors. For instance, the end of 2022 witnessed a “collective redemption backlash of wealth management products” and the third quarter of 2025 experienced a “concentrated shortening of duration in bond funds,” both causing market panics, leading to a sharp increase of over 20 basis points in 10-year government bond yields. In the bond market, a 20 basis point fluctuation is considered a “minor tsunami.”
Looking back at the market panic at the end of 2022, wealth management companies faced overwhelming redemption pressures, requiring them to sell off their most liquid assets first, making the 10-year government bonds the primary sacrifice. Panic selling by all institutions led to a rapid surge in government bond yields, almost paralyzing the entire bond market.
Sun Guoxiang stated, “Introducing new non-bank support tools indicates that the People’s Bank of China recognizes that non-bank institutions have become the core nodes for systemic financial stability.” He added that the probability of a similar stampede of non-bank institutions happening again in China in the future is high, but the likelihood of it evolving into a comprehensive financial crisis is still lower than severe market fluctuations.
However, some scholars question the effectiveness of such financial tools. Xie Tian, a professor at the School of Business at the University of South Carolina, told Da Ji Yuan that the substantial capacity of the People’s Bank of China to prevent and address systemic financial risks is diminishing marginally.
Xie Tian explained that Western liquidity support tools rely on independent market environments for central banks, governments, regulators, and financial institutions with capital freely flowing; whereas under the Chinese system where fiscal and monetary policies are highly integrated, lacking truly independent financial institutions, liquidity gaps are primarily resolved through administrative measures and fiscal measures (printing money).
Xie Tian warned, “The fragility of the current Chinese financial system and the structural decline of the real economy are nearing a critical point. In this system, the real risk of frequently using such tools is causing excessive currency issuance, diluting wealth of the common people, exacerbating economic decline, and even triggering a comprehensive credit collapse and economic slowdown.”