CNBC:
I have three questions. The first one is about China's economic performance. Some economists are worried about whether or not there will be economic stagnation. Has the PBC heeded this concern? Have any countermeasures been planned? The second is a recent PBC survey showing that Chinese people's propensity to save is at its highest in 20 years. What measures will the central bank take to boost consumption? The last question: what's the latest development in digital currency? Thanks.
Zou Lan:
Let me answer the first and third questions, and then Ms. Ruan will answer the second one.
In March and April this year, affected by unexpected factors at home and abroad, China's economy faced increasing downward pressure. As a result, some enterprises and citizens lost their income and balance sheets. Against this background, the government increased its support for the real economy. In the first five months, China's infrastructure investment increased by 6.7%, a 0.5 percentage point higher than the growth rate of the total investment. As part of the macro regulation, these are essential measures to help the economy tide over difficulties.
It should be noted that the impact of the pandemic is temporary. Since May, the COVID-19 pandemic has gradually eased off in China, and a package of policies and measures launched by the State Council to stabilize the economy have taken effect at a faster pace, with the implementation of fiscal policy, monetary policy, and industrial policy having been stepped up. Major economic indicators have improved significantly, and the national economy has seen a notable rebound. According to financial statistics, credit supply has increased significantly. From January to June, loans to corporations rose by 3 trillion yuan compared to the same period of the previous year, and corporate financing was generally good; due to the impact of COVID-19, household loans increased slower than the same period of the previous year, but have also recovered since June. In the future, with COVID-19 being generally under control, it is expected that the macro-economy will maintain a steady recovery, and the corporate and household balance sheets are expected to be gradually repaired and improved, with credit support remaining strong.
In the next stage, we will continue to encourage enterprises and individuals to expand reasonably. What is the most important is to ensure the steady and efficient operation of production and life, maintain the momentum of economic recovery; stabilize revenues, expectations, and confidence of the real sector of the economy; and further enhance the internal momentum for growth and economic vitality. Acting in accordance with the decisions and arrangements made by the CPC Central Committee and the State Council, the PBC will continue to implement its package of policies and measures to stabilize the economy. The PBC will step up efforts to implement a prudent monetary policy to create a favorable monetary and financial environment and ensure that policies will work together to create synergy and keep economic indicators within a reasonable range. To be specific:
The PBC will maintain reasonably ample liquidity. The PBC will ramp up credit support for the real economy, see that increases in money supply and aggregate financing are generally in step with nominal economic growth and turn over surplus profits to the central budget ahead of schedule. The PBC will guide policy banks and development banks to increase 800 billion yuan of credit loans and set up 300 billion yuan of financial instruments to support infrastructure construction.
In terms of price, the PBC will give full play to the effectiveness and guiding role of LPR reforms and the role of the market-based adjustment mechanism of deposit rates, guiding financial institutions to transmit the effect of the drop in deposit rates to the loan side and further promote financial institutions to reduce real loan rates.
In terms of structure, the PBC will continue to make good use of structural monetary policy instruments and give priority to providing financial support to key areas. Since the second quarter of this year, the proportion of incentive funds provided by the PBC through inclusive loans to micro and small businesses has risen from 1% to 2%. The PBC will fully utilize the instruments for supporting the reduction of carbon emission and targeted re-lending for the clean and efficient utilization of coals, scientific and technological innovation, public accessible elderly care, and transport and logistics, and will continue to support the development of agricultural businesses and micro and small businesses to create new areas of economic growth.
I would like to make a brief introduction about the latest progress in research and development of the digital yuan. In the first half of this year, in line with China's 14th Five-Year Plan, the PBC, together with participating institutions, with the support of the party committees and governments of the pilot areas, has been steadily and prudently advancing trials of the digital yuan.
First, the PBC successfully completed pilots of its digital yuan in scenarios, making it the highlight of China's science and technology achievements during the Beijing 2022 Winter Olympics and Paralympics.
Second, the PBC has prudently expanded the pilot areas. Approved by the State Council, the pilot areas have been expanded from the original "10+1" areas to 23 areas in 15 provinces and municipalities. Shenzhen, Suzhou, Xiong'an New Area, and Chengdu have canceled whitelist restrictions and absorbed the Industrial Bank as a new designated operator.
Third, the PBC has been working on making innovations in application scenarios, extending the reach of digital yuan services. Focusing on maintaining stable macroeconomic performance, the digital yuan has played an active role in ensuring people's wellbeing, stimulating consumption, expanding domestic demand, and ensuring stable growth by means of its distinctive functions, such as smart contracts.
Fourth, the PBC has actively engaged in international exchanges and cooperation, expanding its circle of friends in the use of digital yuan. As of May 31 this year, the transaction volume of the digital yuan in the pilot areas of 15 provinces and municipalities had totaled about 264 million, with transaction value approximating 83 billion yuan. The number of merchant stores supporting digital yuan payments has reached 4.57 million.
Next, the PBC will expand the pilot programs to more cities in a prudent and orderly manner, strengthen the scenario construction and application innovation, carry out research on major issues, and deepen international exchanges and cooperation.
That's all from me for your first and third questions.
