Shou Xiaoli:
Thank you, Mr. Guo. The floor is open for questions. Please identify your news outlet before asking question. Thank you.
CCTV:
My question is for Mr. Guo. Last year was the concluding year of the campaign of preventing and defusing financial risks. My question is, what key progress has we made over the past three years? What's the next step of financial risk prevention and control? You have pointed out that real estate has become the most daunting "grey rhino" among China's financial risks, so what's your opinion on the current risk in this regard? Are there new measures to be rolled out this year? All the banks have accelerated digitalized transformation over the past two years. My question is, what kind of challenges has digitalization brought on supervision? What kind of risks should we focus on during the process? Thank you.
Guo Shuqing:
Thank you. Your questions are all very good, but actually you put forward seven or eight ones. I can not take up too much time, and will answer them briefly and give more chances to other reporters and my colleagues.
To prevent and defuse financial risks, the top priority for banking and insurance industries is to follow the requirements of the CPC Central Committee and cut high leverage in the financial system. The financial system witnessed a long period of rapid growth. Then between 2017 and 2020, the annual average growth rate of the total assets in the banking and insurance industries dropped to relatively low levels, with that of the banking sector down to 8.3%, and the insurance sector down to 11.4%, roughly half the growth rates between 2009 and 2016. The share of interbank assets circulating within the financial sector without entering into the real economy has decreased noticeably. This is a remarkable achievement and is also crucial for the banking and financial systems to run in a smooth manner and keep financial risks under control.
Moreover, the banking sector has stepped up efforts to dispose of non-performing assets. Disposal of non-performing loans in the banking sector over the past four years, which was mentioned just now, equals the same amount as the previous 12 years combined.
Third, the "shadow banking" sector has been dismantled in an orderly manner. The "shadow banking" industry was large in the past and the essence of the shadow banking business such as investment, wealth management, or peer-to-peer lending is credit. It provides credit business like banks but operates outside banking regulations. For example, a bank must maintain enough capital but these [shadow banking] platforms operate without being subject to any requirement for capital, regulations, or market restraints, which will consequently lead to serious problems. The shadow banking sector has contracted by about 20 trillion yuan, which makes the overall financial system healthier and more stable.
Moreover, financial crimes have been severely punished and risks of illegal financial groups have been gradually defused, with a large number of illegal fundraising cases being dealt with in an orderly manner. Sound progress has been made in these areas.
Regarding the housing issue that you asked about, I would like to say that the risk of a real estate bubble and financialization of the sector is still acute. However, last year, the growth rate in the number of loans channeled into the real estate sector has, for the very first time, dropped to a level lower than the average growth rate of credit. This is a hard-won achievement. We are confident that problems in the real estate sector will be solved gradually. We are ramping up efforts to put a series of measures in place. Some of you may have noticed that many cities have rolled out city-specific real estate control policies to keep land prices, housing prices, and market expectation stable and ensure that housing problems will be tackled step by step. As I also mentioned, the problem of "the gray rhino," i.e. people buy homes not for living in but for investment or speculation, is very dangerous. By owning so many properties, they stand the chance of suffering huge losses in terms of personal assets once the property market goes down. Moreover, they may not be able to repay their mortgage loans and banks may not be able to take back loan principles and interest accordingly, which will lead to economic chaos. Therefore, it is necessary for us to promote the steady and healthy development of the real estate market in a proactive and prudent manner. Thank you.
