Zou Lan:

I would like to start by briefing you on policy-based and developmental financial instruments, a topic which is of interest to you all.

Since the beginning of this year, due to COVID-19 and unexpected factors such as the Russia-Ukraine conflict, the Chinese economy has been facing some downward pressure and investment in infrastructure has become an important means to maintain stable macroeconomic performance. In accordance with plans made at an executive meeting of the State Council, last month, the PBC increased the credit line of developmental and policy-based banks and strengthened loan support for infrastructure projects that are useful in the long term and feasible in the short term. However, at present, the difficulty in obtaining project capital is one of the main factors hindering infrastructure construction and loan issuance.

At the executive meeting of the State Council on June 29, it was decided that China would adopt policy-based and developmental financial instruments to support the development of major projects. In accordance with the decisions and plans of the CPC Central Committee and the State Council as well as the requirements of the Financial Stability and Development Committee under the State Council, the PBC supported the China Development Bank (CDB) and Agricultural Development Bank of China (ADBC) to respectively set up financial instruments totaling 300 billion yuan. The specific purposes of the financial instruments are: first, shoring up the capital bases of major projects, with the amount not exceeding 50% of the total capital; and second, acting as transit capital for special bonds that cannot be put in place in the short term. For the projects that are to be implemented, financial instruments will quickly and precisely remove impediments caused by lack of capital so that the projects can start as soon as possible. In this way, financial instruments will help maintain stable macroeconomic performance.

Policy-backed and developmental financial instruments invest in line with market principles and make decisions independently in accordance with the law and regulations. They are responsible for their own profits and losses at their own risk, breaking even and earning a meager profit. These instruments focus only on financial investments and exercise the corresponding rights as stockholders instead of involving actual construction and operation of the projects. Meanwhile, they provide exit channels in line with market principles. The projects they invest in should produce good social benefits and be economically feasible. Their investments are guided toward three types of projects, including those in five key areas in the infrastructure sector determined by the 11th meeting of the Central Commission for Financial and Economic Affairs, those in areas such as major scientific and technological innovations, and those can be funded by local government special-purpose bonds.

With well-designed policies, policy-backed and developmental financial instruments, often adopted as temporary measures, can help ensure the availability of capital for major projects instead of resorting to a deluge of strong stimulus policies or over-issuing currency. The instruments can guide financial institutions to provide medium- and long-term, low-cost loan packages, improve the monetary policy's transmission mechanism, ensure stable credit growth, and help produce a combined effect of expanded investment, increased employment, and boosted consumption so as to achieve stable macroeconomic performance. That concludes my introduction.

Xing Huina:

Thank you, Mr. Zou. Now, we welcome questions. Please name the news organization you work for before asking your questions.