Xing Huina:

Thanks for the introduction from Mr. Liu. Now the floor is open to questions. Please indicate the media organization you work for before raising a question.

CCTV:

My question is, in order to prioritize stability, how will the PBC implement the spirit of the Central Economic Work Conference to enhance policy predictability when exerting the role of monetary policies? Thank you.

Liu Guoqiang:

In 2021, we maintained a prudent monetary policy that was flexible, precise, reasonable and appropriate, and took initiative measures in the second half of the year. We cut the RRR by 0.5 percentage point in July, responding early to downward pressure on the economy and paving the way for sustained and steady economic recovery in the second half of 2021 and in the first quarter of 2022. The Central Economic Work Conference proposed that policy efforts should be appropriately advanced. Following the deployments of the CPC Central Committee and the State Council, the PBC launched a series of measures in December 2021, especially after the Central Economic Work Conference. We cut the RRR by 0.5 percentage point, convened a symposium on analyzing the monetary and credit situation for financial institutions, cut off 25 basis points in the interest rates of the re-lending facility supporting agricultural and small businesses, lowered the one-year LPR by 5 basis points, and transferred the "two direct tools" to market-based policy tools for supporting small and micro enterprises. One of the direct tools is the inclusive loan extension support tool. During the special period of the epidemic, we asked financial institutions to extend their loans to enterprises eligible for relative policies and simultaneously provided certain policy incentives. The other tool is the inclusive credit loan support program. At present, China has entered a new normal in economic development while epidemic prevention and control are being conducted on an ongoing basis. Therefore, the two direct tools should be transferred to market-based policy tools. In the past, the policy was based on requirement and policy incentives; whereas now, it's based on a voluntary and incentive mechanism. Financial institutions and enterprises are encouraged to communicate on their own. If the financial institution would like to extend its loans, we will provide certain policy incentives. We will step up cross-cycle adjustment to support economic growth in 2022.

Currently, the economy faces three kinds of pressure. Therefore, maintaining stability is the biggest progress. Before fundamentally easing the economic downward pressure, progress should serve stability. We will not roll out policies that aren't beneficial to stability but release policies that are conducive to stability so that progress can promote stability. Simply put, the priority goal of our current work is stability, and policy support should be redoubled. How to redouble policy support? I think efforts can be made in the following three aspects. First, ample support. The monetary policy tool kits should be further opened to maintain stable aggregates and avoid credit collapse. Second, targeted support. We should attain to the broad and great while addressing the delicate and minute. The financial sector should not only passively wait for clients at their doorsteps, but need to go out and actively look for good projects, which is an effective way of optimizing economic structures, in line with the requirements of the new development philosophy. Third, proactive support. Though it is still the beginning of the year, we should lose no time and act proactively as a year is short. We should stay ahead of the market curve, and respond to common market concerns in a timely manner. We should not procrastinate. Otherwise, market concerns will fall through and go away. If that happened, it would be a difficult situation. Therefore, we should act in advance and promptly respond to common market concerns. 

Under the strong leadership of the CPC Central Committee and the State Council, all parties are making efforts. I believe that we will also find a year quite long and the downward pressure of the economy will become a story of the past within several months. What efforts will be made?

First, maintain stable growth of the aggregate. We will use comprehensive monetary policy instruments to keep liquidity adequate at a reasonable level. Money and credit aggregates will grow at a more stable pace to ensure the increases in money supply and aggregate financing are generally in step with economic growth in nominal terms.

Second, promote steady structure improvements. We should innovate and give good play to structural monetary policy instruments and ramp up credit support for MSBs, technological innovation and green development. 

Third, promote steady decline of the financing costs for enterprises. We will continue to unleash the benefits of the LPR reform, maintain fair competition in the deposit market and stabilize bank liability costs. It is important to maintain orderly competition within the deposit market. If the competition in the deposit market is disorderly, the deposit interest rate will be very high. Low-quality banks and those that perform poorly usually find it hard to attract deposits, so they attempt to lure depositors with high deposit interest rates. Other banks will have to follow. This way, the order of the deposit market and the deposit interest rates will be misguided by those poorly-performing banks. Therefore, deposit order is crucial. Besides, if the deposit interest rate was too high, it would be hard to reduce the loan interest rate and the financing costs of enterprises. That is why we make great efforts to maintain the order of the deposit market, stabilize bank liability costs and promote a steady decline of the overall financing costs for enterprises, especially MSBs.