Yicai:

Facing the severe and complicated economic situation both in China and abroad in 2020, especially due to the impact of COVID-19, what's the situation like regarding risk in the banking and insurance sectors? Also, how high are the credit risks in the banking industry? Have these risks been assessed? Regarding recent risk-related incidents in banks and insurance institutions, how are these issues being resolved? Thank you.

Liang Tao:

Mr. Xiao will answer your questions.

Xiao Yuanqi:

Thank you for your question. As you mentioned, 2020 was truly an eventful year and banks and insurance institutions were indeed affected. However, the current situation is much better than what we estimated at the beginning of the year and the risks of banking and insurance have generally been kept under control. Mr. Liang has already briefed on some of the operating and regulatory indicators of the banking and insurance sectors in 2020, here I will not repeat them. I believe that the reasons for the current situation lie in the following aspects.

First, our work is always to ensure the banking and insurance sectors serve and support the real economy. It is precisely because we have increased support in this regard that the risks faced by banking and insurance institutions are controllable. When the real economy grows well, these institutions will naturally encounter fewer risks; otherwise, their risks will increase. We adopted some special policies at the beginning of this year, especially those helping small and micro-enterprises and private enterprises to overcome difficulties, such as postponing principal and interest repayments on loans and flexibly adjusting regulatory measures. These policies provide enough time and space for the banking and insurance institutions, through their own operations and management, to better serve and promote the development of the real economy. Last year, China's GDP grew by 2.3%, exceeding expectation. China is the only major economy in the world registering positive economic growth in 2020.

Second, we have focused on and adopted many measures to prevent and deal with risks involved in existing non-performing assets. For example, we have disposed of 3.02 trillion yuan in non-performing assets through liquidating, write-off and transferring, etc., with the efforts and amount involved both being unprecedented. We have conducted stricter screening of high-risk institutions and tackled relevant risks. The high risks confronting some small and medium-sized financial institutions, like Baoshang Bank, the Bank of Jinzhou, Hengfeng Bank and some trust companies and insurance institutions, have been effectively defused, easing their burdens. 

Third, we have taken proactive measures to prevent risks. Arrangements have been made in advance to avoid risks of key areas.

In the real estate sector, we have established a comprehensive and unified statistical system for real estate financing. Earlier, the CBIRC and the People's Bank of China issued a notice on the concentration management of real estate financing. If the real estate risk exposure of banking institutions exceeds a certain proportion of the net capital, relevant measures must be taken. At the same time, we have been closely following the changes in housing prices in different regions and cities, and cooperated with other departments and local governments to take appropriate measures based on local conditions. These measures are dynamic and can be adjusted at any time according to local conditions.

We have remained vigilant about shadow banking. Last year, China released its first report on this issue, which you might have covered. We have always stayed alert in regard to shadow banking. Since early 2017, we have made great efforts to improve regulation over the shadow banking sector and achieved great results. Since 2017, the scale of high-risk shadow banking business has shrunk by 20 trillion yuan and this achievement must be consolidated continuously. There was no let-up in our efforts last year as well, so as to firmly prevent high-risk shadow banking business from rebounding .

We intensified banking and insurance institutions' ability to withstand risks. Last year, we took multiple measures to require the banking sector to replenish capital through different markets and various channels, such as bringing in strategic investors, leveraging tier-2 capital tools, and issuing perpetual bonds. In addition, we encouraged local governments to issue special bonds to replenish the capital of small- and medium-sized banks, especially local banks. Currently, this work is underway and has achieved great progress in helping banks to increase capital. By increasing provisions, we strengthen our ability to fend off risks. When disposing of NPLs, we reduced some of our provisions and increased our withdrawal of provisions at the same time to better fend off risks.

These measures took effect across multiple channels and thanks to this multi-pronged approach, risks in banks and insurance institutions are manageable on the whole, no matter whether they're individual, regional, or systematic risks. Just like Mr. Liang said before, operations in the banking and insurance sector are stable and indicators drawn from either institutional performance or risk regulations have remained within an appropriate range. Thanks.