People’s Bank of China to monitor AI’s impact on economy and monetary policy

The People’s Bank of China will track and assess how artificial intelligence affects the economy, financial markets and monetary policy, Governor Pan Gongsheng said at the Financial Street Forum in Beijing on October 19, Bloomberg reported.

Pan said AI’s supply and demand effects may be misaligned in time, potentially raising inflation in the short term before productivity gains push it lower over the medium and long term, according to a summary of his speech. He said the technology’s impact varies across countries, regions and industries and has begun to affect the structure of employment.

AI boom driving global markets

Pan described the AI boom as a major driver of global stock gains and noted that global markets are showing high correlation and volatility. The central bank will monitor AI’s effects on productivity, employment, income distribution and financial stability, and improve financing for AI companies, particularly in core technologies and the government’s “AI+” initiative.

The PBOC also plans to apply AI prudently in its own work, including policy analysis, risk identification, payments, credit reporting and anti-money laundering, while managing data security and model risks.

Policy framework changes announced alongside

Pan used the same speech to say the PBOC will study a timely switch of its main open market operation tenor from seven days to overnight, which would make the overnight repo rate its main policy rate. He also announced a liquidity support tool for non-bank institutions facing large-scale redemptions, an expansion of the Standing Lending Facility to foreign bank entities and plans to connect China’s interbank and exchange bond markets.

The AI remarks follow a September 19 warning from PBOC monetary policy committee member Huang Yiping that rapid AI adoption could worsen China’s imbalance of strong industrial supply and weak domestic demand.