Xinhua News Agency, Beijing, November 10, Title: Persist in serving the real economy and guarding the bottom line of financial risks – Interview with Pan Gongsheng, President of the People’s Bank of China and Director of the State Administration of Foreign Exchange
Xinhua News Agency reporter Wu Yu
Finance is the blood of the national economy. Since the beginning of this year, the People’s Bank of China has implemented prudent monetary policies accurately and effectively, further increasing its support for the real economy, and effectively promoting the continued recovery of our country’s economy and the overall recovery. After the Central Financial Work Conference, how will the People’s Bank of China plan its key tasks in the future? How to further support the real economy? How to deal with risk challenges in the financial field? Xinhua News Agency reporters interviewed Pan Gongsheng, Secretary of the Party Committee and President of the People’s Bank of China, and Secretary of the Party Leadership Group and Director of the State Administration of Foreign Exchange.
Convert the party’s leadership political and institutional advantages into financial governance effectiveness
Q: The Central Financial Work Conference made arrangements for financial work at present and in the future. How will the People’s Bank of China implement it?
Answer: After the Central Financial Work Conference, the People’s Bank of China and the State Administration of Foreign Exchange conscientiously studied and implemented the spirit of General Secretary Xi Jinping’s important speech, formulated implementation plans, and systematically planned key tasks and ideas and measures for the future, mainly in the following aspects:
First, adhere to the centralized and unified leadership of the Party Central Committee over financial work. Insert the Party’s leadership into all aspects and the entire process of the work of the People’s Bank of China and the Foreign Exchange Bureau, improve the system and mechanism of the Party’s management of finance, and transform the political and institutional advantages of the Party’s leadership into financial governance effectiveness.
The second is to adhere to the fundamental purpose of financial services for the real economy. Improve the modern monetary policy framework with Chinese characteristics, always maintain the stability of monetary policy, pay more attention to cross-cyclical and counter-cyclical adjustments, enrich the monetary policy toolbox, and create a solid foundation for stabilizing prices, promoting economic growth, expanding employment, and maintaining the balance of international payments. Good monetary and financial environment.
The third is to insist on coordinating development and security, preventing and defusing major financial risks, and maintaining the smooth operation of the financial market.
The fourth is to persist in deepening financial reform. Accelerate the construction of a modern central bank system and improve the “dual-pillar” regulatory framework of monetary policy and macro-prudential policy. Deepen the market-oriented reform of interest rates and exchange rates. Deepen financial supply-side structural reform.
The fifth is to expand high-level two-way opening up of finance. We will steadily and steadily advance the internationalization of the RMB, deepen reform and opening up in the foreign exchange field, and promote trade, investment and financing facilitation. Steadily expand the institutional opening of the financial market and actively participate in international financial governance.
Efforts to create a good monetary and financial environment for the stable growth of the real economy
Q: What measures will the People’s Bank of China take to increase efforts to support the real economy?
Answer: Since the beginning of this year, the People’s Bank of China has lowered the deposit reserve ratio twice, releasing more than 1 trillion yuan in medium and long-term funds; it has lowered policy interest rates twice, driving market interest rates to continue to decline; it has adjusted and improved real estate financial policies and guided commercial banks to adjust existing mortgage loans. interest rates; twice increased relending and rediscount quotas to support agriculture and small businesses, and extended the implementation of six structural monetary policy tools including inclusive small and micro loan support tools.
At present, the total amount of money and credit maintains rapid growth, the credit structure continues to be optimized, and corporate loan interest rates are at a low level, providing strong and effective support for economic recovery and development.
The total amount is reasonable and sufficient. At the end of September, the stock of broad money M2 and social financing maintained a rapid growth of about 10% year-on-year. The structure is more optimized. The balance of loans to technology-based small and medium-sized enterprises increased by 23% year-on-year, the balance of green loans increased by 37% year-on-year, and the balance of medium and long-term loans in the manufacturing industry increased by 38% year-on-year. Prices have stabilized with some decline, and the weighted average interest rate of corporate loans is at a historically low level.
In the next step, monetary policy will pay more attention to cross-cyclical and counter-cyclical adjustments, maintain reasonable growth in the scale of monetary credit and social financing, continue to increase support for major strategies, key areas and weak links, and promote the stabilization of financing costs for the real economy. There has been a decline, and efforts have been made to create a good monetary and financial environment for the stable growth of the real economy.
Have confidence and ability to maintain the stable operation of the foreign exchange market
Q: How will the People’s Bank of China respond to exchange rate fluctuations?
Answer: There are many factors that affect the exchange rate. The first is economic fundamentals, which is the most fundamental factor. my country’s economy continues to pick up and improve, and the RMB exchange rate is basically stable, which has a solid foundation. A recent report released by the IMF (International Monetary Fund) predicts that China’s economic growth will be 5.4% in 2023, and that of the United States will be 2.1%. Looking at the trend, China’s economy continues to rebound and improve.
From the perspective of the international financial environment, the international market generally believes that this round of interest rate hikes by the Federal Reserve is coming to an end, and the interest rate differential between China and the United States will gradually converge to a normal range in the future.
In addition, as China’s economic growth momentum continues to be activated and the financial market is further opened, the investment attributes and risk-avoiding attributes of RMB assets have become more prominent, and RMB assets have shown good investment value. Since the second half of August, the RMB has been relatively strong against a basket of currencies, with an appreciation rate of more than 2%.
In the next stage, the People’s Bank of China and the State Administration of Foreign Exchange will implement comprehensive policies to stabilize expectations, resolutely prevent unilateral expectations from self-fulfilling, resolutely correct market procyclical behavior, resolutely deal with behavior that disrupts market order, and resolutely prevent the risk of exchange rate overshooting. We have the confidence and ability to maintain the stable operation of the foreign exchange market and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
Promote the disposal of key areas and key financial risks in a smooth and orderly manner
Q: What will the People’s Bank of China focus on in preventing and defusing financial risks?
A: At present, China’s financial system is overall stable, the operating and regulatory indicators of financial institutions are within reasonable ranges, and the financial market is operating smoothly.
We pay close attention to financial risks in some areas. Currently, the risks in the real estate market and local government debt are being discussed more. The risks of small and medium-sized financial institutions and the risks of illegal financial activities also require continued attention.
In terms of the real estate market, my country’s real estate market is currently undergoing a structural change, transitioning from a focus on the incremental market to an equal emphasis on incremental stocks. This process has limited spillovers to the financial system and real estate financial risks are controllable. Since the beginning of this year, the financial sector has taken comprehensive measures from both the supply and demand sides and introduced a number of financial policies to better meet rigid and improved housing needs and promote the acceleration of the construction of a new development model for the real estate industry. In the long term, my country’s urbanization is still in the development stage, and households have a large demand for improved housing, which can provide support for the long-term stable development of the real estate market and industry.
In terms of local government debt, my country’s government debt level is at the mid-to-lower level internationally. The central government’s debt burden is relatively light, and most local governments’ debt levels are not high, and they have more resources and means to resolve debts.
To resolve local government debt risks, we must consolidate local responsibilities, reduce the scale of existing debt, and strictly control new debt financing. Recently, relevant localities have adopted methods such as revitalizing or selling assets to actively raise resources to resolve debts and achieved good results. On this basis, the financial management department takes active actions to guide financial institutions to resolve the debt risks of financing platforms through market-oriented methods such as extensions, borrowing new loans, and replacements, and safeguard the legitimate rights and interests of financial institutions in accordance with the law; establish normalized financial debt monitoring of financing platforms mechanism, promote the market-oriented transformation of financing platforms, etc., and improve long-term mechanisms to prevent and resolve local debt risks.
In the next step, the People’s Bank of China will follow the deployment of the Central Financial Work Conference, improve financial risk prevention, early warning and disposal mechanisms, promote the disposal of key areas and key financial risks in a smooth and orderly manner, bring all financial activities under supervision in accordance with the law, and severely crack down on illegal financial activities. , promote financial stability legislation, accelerate the construction of financial stability guarantee funds, and resolutely maintain the bottom line of preventing systemic financial risks.
Steady expansion of institutional opening-up in the financial sector
Q: What are the next steps in terms of financial opening up?
Answer: In recent years, the People’s Bank of China has proactively and orderly expanded high-level opening up of the financial industry, significantly relaxed market access for the financial services industry, actively promoted high-level opening up of the bond market, and steadily promoted the internationalization of the RMB.
Since 2018, the financial management department has launched more than 50 measures to open up the financial industry, attracting foreign investment to establish more than 110 financial institutions in China. As of the end of September, a total of 1,110 foreign institutions had entered my country’s bond market, and foreign institutions held 3.3 trillion yuan of Chinese bonds, an increase of nearly 200% from five years ago. The functions of RMB as a payment currency, investment and financing currency, and reserve currency have been continuously enhanced, and it has initially achieved network effects for international use.
The People’s Bank of China also actively participates in international financial governance, leads the sustainable finance work of the G20, and participates in the RMB liquidity arrangement of the Bank for International Settlements. This year, China, the United States, and China and Europe also established a financial working group to strengthen communication and cooperation with the United States and Europe on issues related to the economic and financial fields.
In the next step, the People’s Bank of China will continue to steadily expand institutional opening up in the financial sector, strive to create a market-oriented, legal and international first-class business environment, and participate in global economic and financial governance as a builder and contributor.
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