Development policy financial institutions: strengthen functional positioning and deepen reform and innovation

Recently, the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank have held meetings to convey and study the important speech and plenary spirit of General Secretary Xi Jinping at the Third Plenary Session of the 20th Central Committee of the Communist Party of China, and to study, deploy and implement the work.

In the past decade, policy-based financial institutions have played an irreplaceable role in supporting key areas and weak links to serve high-quality development, helping to build a modern economic system, and promoting the construction of a new development pattern of domestic and international dual circulation. The Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization (hereinafter referred to as the "Decision") proposes to deepen the reform of the financial system. It can be seen from the concentrated statements of the three development and policy financial institutions that in the context of financial support for the development of the real economy, policy finance will also usher in greater development space.

Strengthen functional positioning

"China Development Bank Strengthens the Functional Positioning of Policy-based Financial Institutions and Focuses on Serving the National Strategic ......"

"The Export-Import Bank of China resolutely shoulders the responsibility and mission of policy-oriented finance, adheres to the general tone of seeking progress while maintaining stability, and continues to improve the quality and efficiency of serving the real economy......"

"The Agricultural Development Bank further deepens the reform of policy-based financial institutions, further clarifies its functional positioning, business scope, business boundaries and product system, and fully implements the decision-making and deployment ...... of the Party Central Committee"

It can be seen that the three development and policy financial institutions have taken strengthening the functional positioning of policy financial institutions as the key content of implementing the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China and the next step.

It is worth mentioning that the Central Financial Work Conference held at the end of October 2023 emphasized the need to strengthen the functional positioning of policy-based financial institutions. According to the Agricultural Development Bank, the bank's policy loans accounted for 94.12% in 2023, an increase of 0.91 percentage points from the beginning of 2023, and the proportion of policy business and policy loans remained above 90%. The Export-Import Bank of China disclosed that by the end of 2023, the proportion of the bank's policy business increased to 60.72%, and the proportion and growth rate reached a record high.

Doing a good job in the reform of ledger and sub-account is undoubtedly an important part of strengthening the functional positioning of policy-oriented financial institutions. The Export-Import Bank of China said at the 2024 annual work conference that it will promote the implementation of the reform of ledger division this year. The Agricultural Development Bank said that the bank will improve the policy-based financial reform plan, continuously establish and improve the system, strengthen product reorganization, optimize data management, further do a good job in classification and sub-accounting, realize the refined management of policy-based business, and provide strong basic support for better implementation of the decision-making and deployment of the Party Central Committee.

"On the one hand, promoting the reform of ledger and sub-account is conducive to guiding policy banks to reasonably separate policy business from proprietary business, avoid moral hazard, prevent financial arbitrage, and improve the efficiency of the use of financial funds; On the other hand, it is conducive to the formation of a level playing field in the financial market and promoting the formation of a multi-level, wide-coverage and differentiated banking development pattern. Li Peijia, head of the China finance team at the Bank of China Research Institute, said in an interview with the Financial Times.

Based on the main responsibility and main business

Judging from the specific implementation measures of the three development and policy-oriented financial institutions, the banks closely followed the spirit of the Third Plenary Session of the 20th Central Committee of the Communist Party of China and highlighted the financial services in key areas such as infrastructure, foreign trade, and rural revitalization.

China Development Bank said that based on the core functions of the infrastructure bank, it will increase infrastructure investment in five major areas, better serve the construction of a modern infrastructure system, fully demonstrate its mission and unique role, and improve the quality and efficiency of serving key areas and weak links of national strategies.

The Export-Import Bank of China said that it will focus on serving the national strategy, systematically plan the reform of policy-based financial institutions and the reform of the bank's internal system and mechanism around its main responsibilities and main businesses, and implement various reform tasks in place; We will continue to improve the quality and efficiency of serving the real economy, make every effort to promote high-level opening-up, and better coordinate development and security.

The Agricultural Development Bank said that it will give full play to the professional advantages of the "four banks" of the food bank, the water conservancy bank, the rural land bank and the green bank, organically combine the five major articles of finance with the service areas and work priorities of the Agricultural Development Bank, vigorously support the special tasks such as the "three major projects", and give full play to the role of cross-cyclical and counter-cyclical adjustment.

In the past decade, the three development and policy-oriented financial institutions have made important contributions to the implementation of major national strategies, the promotion of economic restructuring, and the promotion of industrial transformation and upgrading, especially the role of quasi-public goods, helping to achieve major national strategic goals such as infrastructure construction and opening up. By serving the "two bases and one branch" (infrastructure, basic industries and pillar industries), the China Development Bank (CDB) has guided the convergence of financial resources to major projects such as the power and coal industries and the Three Gorges Project, making important contributions to supporting the mainland's economic transformation, economic structural upgrading and enterprises "going global". The Export-Import Bank of China has strongly supported the export of mechanical and electrical products and complete sets of equipment from the mainland and deepened cooperation in international production capacity through policy-based trade financing and other means.

Undertake new missions and new tasks

"Overall, after years of reform and development, the three development and policy-oriented financial institutions have made important contributions to the realization of major national strategic goals, the implementation of counter-cyclical adjustment macro tasks, and the promotion of financial inclusive growth. In this process, its own operating ability and economic strength have also been comprehensively improved. Li Peijia said.

At the same time, it should also be noted that in the context of high-quality economic development and the acceleration of the construction of Chinese-style modernization, the reform of the three development and policy-oriented financial institutions is facing a new situation and undertaking new missions.

Li Peijia believes that the first is to increase financial support for key areas such as scientific and technological innovation, future industries, and major infrastructure around the requirements of Chinese-style modernization. These fields have the characteristics of long cycle, large scale and high risk, which require financial institutions to strengthen innovation and guide the convergence of financial resources in these fields. Second, it is necessary to further play the role of development and policy-oriented financial institutions around the construction of the "Belt and Road". The "Decision" proposes to improve the mechanism for promoting high-quality Belt and Road cooperation. The Belt and Road countries have different stages of economic development, the development of financial markets is relatively lagging behind, and the credit environment, legal system, demand structure and project complexity are different. Third, we will continue to promote financially inclusive growth and show new achievements in helping rural revitalization. The "Decision" proposes that the integrated development of urban and rural areas is an inevitable requirement of Chinese-style modernization, adhere to the priority development of agriculture and rural areas, improve the investment mechanism of rural revitalization, etc., agriculture has the characteristics of low returns, slow results, and high risks, and requires financial institutions to play a long-term role.

The China Development Bank said that it is necessary to do a solid job in the second half of the year, enhance the stability of credit growth, optimize the credit structure, and increase support for infrastructure, scientific and technological innovation, emerging industries and future industries, advanced manufacturing, green and low-carbon, rural revitalization, regional development, the "three major projects", the joint construction of the "Belt and Road" and other national strategic key areas and weak links, so as to serve the sustained and healthy development of the economy. Coordinate development and safety, continue to do a good job in risk prevention, mitigation and disposal, and strengthen safe production.

The Agricultural Development Bank said that it is necessary to adhere to the goal-oriented, market-oriented, and problem-oriented, focus on solving institutional obstacles and mechanisms, further promote the reform of eight key areas, further improve the system and mechanism, and continuously improve the efficiency of governance and the effectiveness of performing duties.

Source: Financial Times