Pan Gongsheng, Governor of the People's Bank of China: Resolutely deal with behaviors that disrupt market order and prevent the risk of exchange rate overshoot

Finance is the lifeblood of the national economy. Since the beginning of this year, the People's Bank of China has accurately and effectively implemented a prudent monetary policy, further increased support for the real economy, and effectively promoted the sustained recovery and overall recovery of the mainland economy. After the Central Financial Work Conference, how does the People's Bank of China plan the key work in the coming period? How can we further support the real economy? How to deal with the risks and challenges in the financial sector? Xinhua reporters interviewed Pan Gongsheng, secretary of the party committee and governor of the People's Bank of China, secretary of the party leading group and director of the State Administration of Foreign Exchange.

Transform the party's leadership and political advantages and institutional advantages into financial governance efficiency

Q: The Central Financial Work Conference has made arrangements for financial work at present and for a period of time to come, how will the People's Bank of China implement them?

A: 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 and implemented the plan, and systematically planned key tasks and ideas and measures for the coming period, mainly in the following aspects:

The first is to adhere to the centralized and unified leadership of the CPC Central Committee over financial work. The party's leadership runs through all aspects and the entire process of the work of the People's Bank of China and the State Administration of Foreign Exchange, improves the party's financial management system and mechanism, and transforms the party's political and institutional advantages into financial governance efficiency.

The second is to adhere to the fundamental purpose of financial services for the real economy. Improve the framework of modern monetary policy with Chinese characteristics, always maintain the soundness of monetary policy, pay more attention to cross-cyclical and counter-cyclical 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, we should adhere to the overall planning of development and security, prevent and resolve major financial risks, and maintain the smooth operation of the financial market.

Fourth, we should continue to deepen financial reform. We will speed up the construction of a modern central bank system and improve the "two-pillar" regulatory framework of monetary policy and macro-prudential policy. Deepen the market-oriented reform of interest rates and exchange rates. Deepen the supply-side structural reform of the financial sector.

Fifth, expand high-level two-way opening up of the financial sector. We will steadily and steadily promote the internationalization of the renminbi, deepen the reform and opening up of the foreign exchange sector, and promote the facilitation of trade, investment and financing. Steadily expand the institutional opening of the financial market, and actively participate in international financial governance.

Efforts should be made to create a good monetary and financial environment for the steady growth of the real economy

Q: What measures will the People's Bank of China take to increase support for the real economy?

A: Since the beginning of this year, the People's Bank of China has lowered the reserve requirement ratio twice, releasing more than 1 trillion yuan in medium- and long-term funds. The policy rate was lowered twice, driving the market interest rate to continue to fall; adjust and improve real estate finance policies, and guide commercial banks to adjust the interest rates of existing housing loans; The quota of re-lending and re-discounting to support agriculture and small enterprises has been increased twice, and the implementation of six structural monetary policy tools, including inclusive small and micro loan support tools, has been extended.

At present, the total amount of money and credit has maintained rapid growth, the credit structure has been continuously optimized, and the interest rate on corporate loans has been at a low level, providing strong and effective support for the recovery and development of the economy.

At the end of September, broad money M2 and the stock of social financing maintained a rapid growth rate of about 10% year-on-year. In terms of structure, the balance of loans to small and medium-sized technology-based 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 to the manufacturing industry increased by 38% year-on-year. Prices have been stable and declining, and the weighted average interest rate on corporate loans is at a historically low level.

In the next step, monetary policy will pay more attention to cross-cyclical and counter-cyclical adjustment, 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 in financing costs of the real economy, and strive to create a good monetary and financial environment for the stable growth of the real economy.

Have the 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?

A: There are many factors that affect the exchange rate. The first is economic fundamentals, which are the most fundamental factor. The mainland's economy has continued to pick up and improve, and there is a solid foundation for the basic stability of the renminbi exchange rate. A recent report released by the International Monetary Fund (IMF) predicts that China's economic growth rate in 2023 will be 5.4%, and that of the United States will be 2.1%; In terms of trends, China's economy continues to pick up.

From the perspective of the international financial environment, the international market generally believes that the Fed's current round of interest rate hikes is nearing the end, and the interest rate differential between China and the United States will gradually converge to a normal range in the future.

In addition, with the continuous activation of China's economic growth momentum and the further opening of the financial market, the investment attributes and hedging attributes of RMB assets have become prominent, and RMB assets have shown good investment value. Since the second half of August, the renminbi has been relatively strong against a basket of currencies, appreciating by more than 2%.

In the next stage, the People's Bank of China and the State Administration of Foreign Exchange will implement comprehensive measures to stabilize expectations, resolutely prevent unilateral expectations from self-realizing, resolutely correct pro-cyclical behaviors in the market, resolutely deal with behaviors that disrupt market order, and resolutely prevent the risk of exchange rate overshoot. 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 handling of key areas and key financial risks in a smooth and orderly manner

Q: What are the key points that the People's Bank of China will focus on in preventing and resolving financial risks?

A: At present, China's financial system is generally stable, the operating and regulatory indicators of financial institutions are within a reasonable range, and the financial market is operating smoothly.

We pay close attention to financial risks in some areas, including the risks of the real estate market and local government debt, the risks of small and medium-sized financial institutions, and the risks of illegal financial activities.

In terms of the real estate market, the current mainland real estate market is undergoing a structural transformation, from an incremental market to an incremental stock, which has limited spillover to the financial system and controllable real estate financial risks. Since the beginning of this year, the financial sector has implemented comprehensive policies from both the supply and demand ends, and introduced a number of financial policies to better meet the demand for rigid and improved housing, and promote the acceleration of the construction of a new development model for the real estate industry. In the long run, the mainland's urbanization is still in the development stage, and there is a large demand for improved housing for residents, which can provide support for the long-term stable development of the real estate market and the industry.

In terms of local government debt, the level of mainland government debt is in the middle and lower reaches of the international market. The central government's debt burden is relatively light, and most local governments have low debt levels, and have more resources and means to resolve debts.

To resolve the risk of local government debt, it is necessary to consolidate local responsibilities, reduce the scale of existing debt, and strictly control new debt financing. Recently, the localities concerned have adopted such methods as revitalizing or selling assets to actively raise resources to resolve debts and achieve good results. On this basis, the financial management department has taken active actions to guide financial institutions to resolve the debt risks of financing platforms through market-oriented methods such as extension, repayment of old loans, and replacement, and safeguard the legitimate rights and interests of financial institutions in accordance with the law; Establish a normalized financial debt monitoring mechanism for financing platforms, promote the market-oriented transformation of financing platforms, and improve long-term mechanisms for preventing and resolving local debt risks.

In the next step, the People's Bank of China will, in accordance with the arrangements of the Central Financial Work Conference, improve the financial risk prevention, early warning and disposal mechanism, promote the disposal of key areas and key financial risks in a stable and orderly manner, bring all financial activities into supervision in accordance with the law, 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 no systemic financial risks.

Steadily expand the institutional opening up of the financial sector

Q: What are the considerations for opening up the financial sector to the outside world in the next step?

A: In recent years, the People's Bank of China has taken the initiative to expand the high-level opening up of the financial industry in an orderly manner, greatly relaxed the market access of the financial services industry, actively promoted the high-level opening up of the bond market, and steadily promoted the internationalization of the RMB.

Since 2018, the financial authorities have introduced more than 50 measures to open up the financial sector, attracting foreign investment to set up more than 110 financial institutions in China. As of the end of September, a total of 1,110 foreign institutions had entered the mainland bond market, and foreign institutions held 3.3 trillion yuan of mainland bonds, an increase of nearly 200% from five years ago. The function of the renminbi as a payment currency, investment and financing currency, and reserve currency has been continuously enhanced, and it has initially possessed the network effect of international use.

The People's Bank of China also actively participates in international financial governance, leading the G20 sustainable finance work and participating in the RMB liquidity arrangement of the Bank for International Settlements. This year, China and the United States and China and the EU have also set up a financial working group to strengthen communication and cooperation with the United States and the EU on issues related to 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, strive to create a market-oriented, law-based and international first-class business environment, and participate in global economic and financial governance as a builder and contributor.