China’s monetary policy should maintain its primary focus on the domestic situation, maintaining the effectiveness of this policy while also taking into account the external environment, said Yi Gang, governor of the People’s Bank of China, The Paper reported.

Yi emphasized that the central bank must pay more attention to the spread of risk between different markets, such as bonds, stock markets and the foreign exchange.

In terms of reform of the foreign exchange, Yi said it is necessary to let the yuan rate fluctuate and be more flexible, thus strengthening the role of the market.

It is also necessary to emphasize the foreign exchange rate’s role in balancing macroeconomics, as well as the balance of payments.

As for resolving financial risks, the PBOC will unify the standards of asset management products, tighten regulations on enterprises investing in financial institutions, include financial holding companies into supervision, and, improve the supervision on systemically important financial institutions.