Xing Huina:
Friends from the media, good afternoon. Welcome to this press conference held by the State Council Information Office (SCIO). Today, we have invited Mr. Liu Guoqiang, deputy governor of the People's Bank of China (PBC), to brief you on China's financial statistics in 2021 and answer your questions. We are also joined by Mr. Sun Guofeng, director general of the Monetary Policy Department at the PBC; Mr. Zou Lan, director general of the Financial Market Department at the PBC; and Ms. Ruan Jianhong, director general of the Statistics and Analysis Department at the PBC.
Next, let's give the floor to Mr. Liu for a brief introduction.
Liu Guoqiang:
Friends from the media, good afternoon. It is a pleasure for me to attend this press conference. I will first make a brief opening introduction on the financial work in the past year and our plans for the next step.
Since the 18th National Congress of the Communist Party of China (CPC), guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBC has implemented the decisions and plans of the CPC Central Committee and the State Council, followed the overall arrangement of the Financial Stability and Development Committee under the State Council, remained committed to the general principle of pursuing progress while ensuring stability, and implemented a prudent monetary policy, which have contributed to China's decisive victory in building a moderately prosperous society in all respects. In recent years in particular, monetary policy has continuously helped improve the quality and efficiency of serving the real economy and promoted China to lead globally in economic development.
In 2021, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBC resolutely implemented the decisions of the CPC Central Committee and the State Council and enhanced cross-cycle adjustments in light of China's economic conditions. In the first half of the year, there were many positive factors in the operation of the domestic economy. The PBC maintained reasonable and ample liquidity, made good use of relending and two direct tools, that is, the inclusive loan repayment extension support tool and inclusive credit loans to micro and small businesses (MSBs), optimized the supervision of deposit interest rates, and raised the reserve requirement ratio (RRR) for foreign currency deposits by 2 percentage points. While guiding credit growth back to normal, efforts have also been made to optimize the credit structure and reduce financing costs. In the second half of last year, domestic economic development faced triple pressures of shrinking demand, supply shocks and weakening expectations. The PBC coordinated cross-year policies to give full play to the dual functions of monetary policy tools in terms of volume and structure. In July, the RRR was cut by 0.5 percentage point across the board, releasing 1 trillion yuan in long-term liquidity, helping to bolster the real economy and paving the way for a sustained and stable economic recovery in the second half of the year. In August, a symposium analyzing monetary and credit conditions was held to guide financial institutions to enhance the stability of total credit growth. In September, the PBC raised the quota of special central bank lending by 300 billion yuan to support locally incorporated banks to increase loans to MSBs and self-employed businesses. In November, carbon emission reduction support instruments and a special relending facility worth 200 billion yuan was launched to increase the overall energy supply capacity and promote the clean and efficient use of coal. In December, we cut the RRR by another 0.5 percentage point, releasing about 1.2 trillion yuan in long-term funds. The two RRR cuts in the middle and at the end of the year released a total of 2.2 trillion yuan in long-term funds; symposiums analyzing monetary and credit conditions of financial institutions were held to guide financial institutions to make cross-cycle credit arrangements for the end of the year and the beginning of next year; the PBC also lowered the interest rate of the relending program for the agricultural sector and small businesses by 0.25 percentage point and the one-year loan prime rate (LPR) was lowered by 0.05 percentage point, which helped the comprehensive financing costs of businesses remain stable and fall moderately; the PBC converted two direct tools into market-based policy tools to support micro and small business and support financing of micro, small and medium-sized enterprises (MSMEs); the PBC raised the RRR for foreign currency deposits of financial institutions by 2 percentage points and maintained the basic stability of the yuan exchange rate at a reasonable and balanced level. In the past year, we had a busy schedule but remained organized. Every month, we made arrangements with the clear purposes of promoting steady growth while taking into account structural optimization, in particular, in the second half of the year.
In general, the 2021 monetary policy was flexible, accurate, proper and moderate. It was more forward-looking, stable, targeted, effective and self- directed. China's major financial indicators maintained strong growth on top of the high base of 2020. The financial system operated steadily and the financial support for the real economy was solid. In 2021, new yuan loans reached 19.95 trillion yuan, a year-on-year increase of 315 billion yuan. By the end of 2021, the M2 and aggregate financing increased by 9% and 10.3% year-on-year, respectively, basically matching the nominal economic growth rate. On the two-year average, the M2 and aggregate financing grew by 9.5% and 11.8%, respectively, which basically matched and were slightly higher than the average nominal economic growth rates in 2020 and 2021. By the end of 2021, the macro leverage ratio was 272.5%, down 7.7 percentage points from the end of the previous year, and remained basically stable. The interest rates for corporate loans in 2021 stood at 4.61%, a decrease of 0.1 percentage point from 2020 and a decrease of 0.69 percentage point from 2019, which was the lowest level since reform and opening up began. By the end of 2021, the balance of medium and long-term loans to the manufacturing sector increased by 31.8% year-on-year, 20.2 percentage points higher than the growth rate of all loans. By the end of 2021, the balance of inclusive loans to micro and small business increased by 27.3% year-on-year, benefiting more than 44 million MSBs. The weighted average interest rate of newly issued inclusive loans to MSBs in November was 4.98%, 0.1 percentage point lower than that of December 2020.
In 2022, the PBC will implement the spirit of the Central Economic Work Conference, prioritize stability, and pursue progress while ensuring stability. We will maintain a prudent monetary policy that is flexible and appropriate, step up cross-cycle adjustment, and give full play to the dual functions of monetary policy instruments both in terms of volume and structure. We will be more proactive and enterprising, enhance our policy predictability and guide financial institutions to increase support for the real economy — especially for small and micro businesses, scientific and technological innovation, and green development, so as to ensure stable operation of the macro economy, as well as foster an appropriate monetary and financial environment for high-quality economic development
Specifically, the PBC's work will focus on the following aspects:
First, maintaining stable credit growth. We will use multiple monetary policy tools to maintain liquidity at a reasonable and ample level, ensure stable credit growth, and guide financial institutions to increase the credit supply so as to ensure the money supply and social financing expansion will basically match the nominal economic growth rate.
Second, steadily improving the credit structure. We will broaden the use of structural monetary policy instruments, implement market-based policy tools to support small and micro businesses, and make good use of the supporting tools for carbon reduction and special reloans for the clean and efficient use of coal. Financial institutions will be guided to increase the credit supply to areas where credit growth is slow and improve the credit structure. Targeted measures will be adopted to increase credit support for key areas and weak links.
Third, steadily reducing overall financing costs for enterprises. We will improve the market-based interest rate mechanism and transmission mechanism, give play to the reform of the LPR mechanism, and stabilize the costs of bank debt, so as to steadily reduce enterprises' overall financing costs and encourage the financial system to transfer profits to the real economy.
Fourth, keeping the yuan exchange rate generally stable at an appropriate and balanced level. We should let market supply and demand play a decisive role in the formation of the yuan exchange rate, and give full play to the exchange rate's role as an automatic stabilizer in adjusting the macro economy and international payments. There are many factors affecting the exchange rate. The exchange rate's uncertainty is inevitable, while its two-way fluctuations are normal. Enterprises and financial institutions should establish the concept of "risk-neutral." Financial institutions should actively provide exchange-rate risk-management services for MSMEs, in order to reduce their costs of hedging exchange-rate risks. Our goal is to keep the yuan exchange rate generally stable at an appropriate and balanced level. Although the exchange rate may deviate from the equilibrium level in the short term, market and policy factors will correct the deviation in the mid- and long-term. Thank you.
