Since the beginning of this century, several sudden crisis events and the economic reality of various countries have shown that only the monetary policy tool that anchor economic growth and price stability cannot effectively achieve the dynamic balance of “stable growth” and “risk prevention”. In this context, China’s traditional macro regulation framework with “steady growth” as the core has gradually been transformed into a macroprudential framework that takes into account the goal of financial and economic stability.

This paper integrates a mixed-frequency dynamic factor model and the CRITIC weight assignment method to achieve the measurement of China’s financial stability, and uses the state-dependent local projection model to conduct an in-depth discussion on the regulatory effect and dominant strategy of the “two pillar” policy. The results show that: The function-exerting capacity of China’s financial system and the overall financial stability situation show a steady upward trend, and the impact of the Sino-US trade friction and sudden public health events on China’s financial stability is generally controllable. The “two pillar” policy can effectively exert a policy synergy effect, and “moderately loose monetary policy + tightened macroprudential policy” is the dominant strategy when both financial stability and economic growth are in the low regime. When both function-exerting capacity and shock resistance capacity are in the low regime, the financial stability effect of the tightened macroprudential policy is more prominent and stable, while the moderately loose quantitative monetary policy also has a certain positive impact on both.

The policy recommendations are as follows: First, we should continue to improve the risk disposal mechanism, prudently defuse existing risks and timely curb incremental risks, and properly respond to various risks and challenges with a more proactive attitude. Second, we should fully understand the series of long-term strategic goals of the economic and financial system in the new development paradigm, jointly build a large-scale financial regulatory framework through measures such as institutional implementation, mechanism improvement, and legal system perfection, and promote the formation of a financial stability guarantee system suitable for the construction of a financial power. Third, we should enhance the consistency of macro policy orientation and give full play to the differentiated advantages of the total adjustment of monetary policy and the structural adjustment of macroprudential policy.