Jiemian:

Among the data just mentioned, I found that although the profits of commercial banks declined, the expansion velocity of the total assets of banking financial institutions grew even faster than the previous year. How do you view this? What is the expected change for the profits of commercial banks as well as the non-performing loan ratio of banking financial institutions in 2021? Thank you.

Xiao Yuanqi:

You have asked a very good question. It seems that you have run the numbers through. It is true that, last year, the assets size, especially the scale of loans by banks showed a considerable increase. As Mr. Liang said, last year, the loans had increased by more than 19 trillion yuan, but profits declined. The reasons include the following aspects: first, we asked the banks to return profits to enterprises, especially those small and micro businesses, and we have already achieved the target of returning profits valued 1.5 trillion yuan, which is no small figure. Second, we strictly investigated and dealt with illegal charges. Last year, we basically eliminated all the unreasonable charges existing in previous years; thus, the income related to bank charges declined. Third, after the marketization reform of the interest rate system, the interest margin of the banks shrank continuously. Currently, the interest margin of banks is about 2% on average; for a long time, it had been around 3%. While the interest rate of loans has declined constantly, that of deposits has not changed, or has even increased. The narrowing of interest margin was due to a rise in the overall cost of debt in regard to deposits. Recently, the yield rate of financial products we can buy from the banks reached 3% to 4%. There was a time when the interest rate of structural deposits also reached 3%-4%, and the interest rate of some banks was even higher. The interest rate of certificates of deposit was also around 3%. Therefore, the cost of debt increased. A combination of all these factors led to a rise in the size of assets and a decline in profits for banks. We believe that this is a very normal phenomenon. Generally speaking, the profitability of our banks is relatively healthy, and the rate of capital return and return on assets of our banks are also above the average level in the world. Therefore, there is still enough resources to supplement capital.

Your second question is regarding NPLs. Looking at the numbers, the NPL ratio dropped by 0.06 percentage points last year. There are many reasons for this. First, we have required banks to strengthen risk management and three aspects of loan checks, namely, pre-loan investigation, in-loan review and post-loan inspection. Banks must strictly guard against risks. Second, banks should increase their efforts in disposing of NPLs. A total of 3.02 trillion yuan of non-performing assets were disposed of last year, which was an unprecedented amount. Third, last year's economic growth exceeded expectations. China's economy grew by 2.3%, which created a good foundation for preventing a substantial rebound of banks' NPLs. However, supervision should focus on this issue from a prudential perspective. We should also be aware that the future situation of banks' NPLs is still relatively serious. It is possible that potential NPLs could increase, but we have conducted stress tests and made contingency plans accordingly. Thank you.