Create a good monetary and financial environment for the steady growth of the real economy
Since the beginning of this year, the prudent monetary policy has been precise and powerful, intensified countercyclical adjustment, effectively served the real economy, effectively prevented and controlled financial risks, and promoted the overall recovery of China’s economy. Next, how to implement the decision-making arrangements of the Central Financial Work Conference and provide high-quality financial services for economic and social development? How to better prevent and resolve financial risks? Our reporter interviewed Pan Gongsheng, Party Secretary and President of the People’s Bank of China and Party Secretary and Director of the State Administration of Foreign Exchange.
Monetary policy strongly supports the development of the real economy.
Reporter: The Central Financial Work Conference held a few days ago has made arrangements for the current and future financial work. How will the People’s Bank of China and the State Administration of Foreign Exchange implement them?
Pan Gongsheng: The People’s Bank of China and the State Administration of Foreign Exchange will thoroughly study and implement the spirit of the important speech delivered by the Supreme Leader General Secretary at the Central Financial Work Conference and the decision-making arrangements of the CPC Central Committee, formulate implementation plans, and systematically plan key tasks and ideas and measures in the future.
First, adhere to the centralized and unified leadership of the CPC Central Committee over financial work. The Party’s leadership should run through all aspects and the whole process of the work of the People’s Bank of China and the State Administration of Foreign Exchange, improve the system and mechanism of the Party’s financial management, and transform the political and institutional advantages of the Party’s leadership into the effectiveness of financial governance.
The second is to adhere to the fundamental purpose of financial services to the real economy. Improve the framework of modern monetary policy with China characteristics, always maintain the stability of monetary policy, pay more attention to cross-cycle and counter-cycle adjustment, enrich the monetary policy toolbox, and create a good monetary and financial environment for stabilizing prices, promoting economic growth, expanding employment and maintaining the balance of payments.
Third, adhere to overall development and security, prevent and resolve major financial risks, and maintain the smooth operation of the financial market.
The fourth is to persist in deepening financial reform. Accelerate the construction of a modern central banking system, improve the dual-pillar regulatory framework of monetary policy and macro-prudential policy, deepen the market-oriented reform of interest rates and exchange rates, and deepen the structural reform of the financial supply side.
The fifth is to expand the high-level two-way opening of finance. We will steadily and prudently promote the internationalization of RMB, deepen the reform and opening up in the foreign exchange field, promote the facilitation of trade, investment and financing, steadily expand the institutional opening of financial markets, and actively participate in international financial governance.
Reporter: What measures has the People’s Bank of China taken this year to support the real economy? How effective are these measures?
Pan Gongsheng: Since the beginning of this year, the monetary policy has been adjusted countercyclically, and the tools of aggregate and structure, quantity and price have been used as a whole, which has more strongly supported the development of the real economy. At present, the total amount of money and credit has maintained rapid growth, the credit structure has been continuously optimized, and the interest rate of corporate loans is at a low level, which has provided strong and effective support for economic recovery and development.
The total amount is reasonable and abundant. At the end of September, the stock of broad money (M2) and social financing scale maintained a rapid growth of about 10% year-on-year. The structure is more optimized. The year-on-year growth rate of small and micro loans of Pratt & Whitney is higher than 20% for four consecutive years, and the number of credit granting households exceeds 60 million, which is double that of the end of 2019. The balance of loans for small and medium-sized science and technology enterprises increased by 23%, the balance of green loans increased by 37%, and the balance of medium and long-term loans for manufacturing industry increased by 38%. The price has been stable and declining. In September, the weighted average interest rate of new corporate loans was 3.82%, which was at a historically low level. The downward adjustment of the interest rate of the first home loan in stock benefited about 50 million families and 150 million people, saving about 170 billion yuan in household interest expenses every year.
In the next step, monetary policy will pay more attention to cross-cycle and countercyclical adjustment, balance the relationship between short-term and long-term, steady growth and risk prevention, internal balance and external balance, maintain a reasonable growth in the scale of monetary credit and social financing, continue to increase support for major strategies, key areas and weak links, promote the steady decline of financing costs in the real economy, and strive to create a good monetary and financial environment for the steady growth of the real economy.
China’s financial system is sound as a whole, and the financial market is running smoothly.
Reporter: At present, what is the overall operation of China’s financial system? What are the key tasks of China People’s Bank in preventing and resolving financial risks?
Pan Gongsheng: At present, China’s financial system is sound as a whole, the operating and regulatory indicators of financial institutions are in a reasonable range, and the financial market is running smoothly. By the end of June, the capital adequacy ratio, non-performing loan ratio and provision coverage ratio of China commercial banks were 14.7%, 1.62% and 206% respectively. According to the rating results of financial institutions of the People’s Bank of China, the vast majority of banking financial institutions operated steadily.
At the same time, we pay close attention to financial risks in some areas.
In terms of real estate market, China’s real estate market is currently undergoing structural changes. The central level of housing demand, the transaction structure of the housing market and the industry model are all facing some profound changes. The real estate market is transitioning from incremental market to incremental stock. Generally speaking, the spillover of this process to the financial system is limited, and the real estate financial risks are controllable. Since the beginning of this year, the financial sector has made comprehensive policies from both supply and demand sides, and introduced a number of financial policies to better meet the demand for rigid and improved housing and promote the construction of a new development model for the real estate industry. In the long run, China’s urbanization is still in the development stage, and the demand for improved housing for residents’ families is large, which can provide support for the long-term stable development of the real estate market and industry.
In terms of local government debt, on the whole, China’s government debt level is at the middle and lower level in the world. From the structural point of view, the debt burden of the central government is relatively light, and the debt level of most places is not high, and there are more resources and means to resolve the debt. The CPC Central Committee and the State Council attached great importance to the prevention and resolution of local debt risks. In accordance with the requirements of the central government’s deployment, recently, the relevant localities have actively raised resources to resolve debts by revitalizing or selling assets, and achieved good results. The financial management department has also taken active actions to guide financial institutions to steadily support and resolve the debt risk of financing platforms through market-oriented methods such as extension, borrowing new ones and replacing old ones, and safeguard the legitimate rights and interests of financial institutions according to law; At the same time, by establishing a normalized financial debt monitoring mechanism for financing platforms, promoting the market-oriented transformation of financing platforms, we will improve the long-term mechanism to prevent and resolve local debt risks.
In addition, the risks of small and medium-sized financial institutions and illegal financial activities still need continuous attention.
In the next step, we will adhere to the overall development and security, improve the mechanism of financial risk prevention, early warning and disposal in accordance with the deployment of the Central Financial Work Conference, promote the disposal of financial risks in key areas and key areas in a stable and orderly manner in accordance with the principles of marketization and rule of law, bring all financial activities under supervision according to law, severely crack down on illegal financial activities, promote financial stability legislation, speed up the construction of financial stability guarantee funds, and resolutely hold the bottom line that no systematic financial risks will occur.
Reporter: How do you view the current exchange rate situation? How to deal with exchange rate fluctuations?
Pan Gongsheng: There are many factors that affect the exchange rate. The first is the economic fundamentals. This is the most fundamental factor. China’s economy continues to pick up, and there is a solid foundation for the basic stability of the RMB exchange rate.
The second is the international financial environment. The international market generally believes that the Fed’s interest rate hike is coming to an end, and the spread between China and the United States will gradually converge to the normal range in the future.
The third is the investment value and attractiveness of RMB assets. In the medium and long term, with the continuous activation of China’s economic growth momentum and the further opening of the financial market, the investment and hedging properties of RMB assets are highlighted, and RMB assets show good investment value.
We are confident and capable of maintaining the stable operation of the foreign exchange market and maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level. In the next stage, the People’s Bank of China and the State Administration of Foreign Exchange will make comprehensive measures to stabilize expectations, resolutely prevent unilateral expectations from realizing themselves, resolutely correct market procyclical behaviors, resolutely deal with behaviors that disrupt market order, and resolutely guard against the risk of exchange rate overshoot.
Continue to steadily expand institutional opening in the financial sector.
Reporter: What progress has been made in financial opening up in recent years? What’s the next step?
Pan Gongsheng: In recent years, the People’s Bank of China has actively and orderly expanded the high-level opening of the financial industry.
First, the market access of financial services industry has been greatly relaxed. Since 2018, the financial management department has introduced more than 50 measures to open up the financial industry, attracting foreign investment and setting up more than 110 financial institutions in China.
Second, actively promote the high-level opening up of the bond market. "Bond Connect" and "Exchange Connect" operated smoothly and efficiently, the investment environment in the bond market continued to be optimized, and the convenience for foreign investors to invest in the market continued to improve.
The third is to steadily promote the internationalization of the RMB. As a payment currency, an investment and financing currency and a reserve currency, the function of RMB has been continuously enhanced, and it has initially possessed the network effect of international use, providing more diversified currency choices for domestic and foreign entities.
While opening wider to the outside world, we also actively participate in international financial governance. This year, China, the United States and China and Europe set up financial working groups to strengthen communication and cooperation with the United States and Europe on relevant issues in the economic and financial fields.
In the next step, the People’s Bank of China will continue to steadily expand the institutional opening of the financial sector in accordance with the unified arrangements of the CPC Central Committee and the State Council, and strive to create a market-oriented, rule-of-law and international first-class business environment. At the same time, adhere to the principle of multilateralism and participate in global economic and financial governance as builders and contributors.