SCIO briefing on China's financial statistics in 2020
Beijing | 3 p.m. Jan. 15, 2021

The State Council Information Office (SCIO) held a press conference in Beijing on Friday to brief the media about data on China's financial sector in 2020.


Chen Yulu, deputy governor of the People's Bank of China (PBOC)

Ruan Jianhong, spokesperson of the PBOC and director-general of the Statistics and Analysis Department of the PBOC

Sun Guofeng, director-general of the Monetary Policy Department of the PBOC

Zou Lan, director-general of the Financial Market Department of the PBOC


Shou Xiaoli, deputy head of the Press Bureau of the State Council Information Office

Read in Chinese


Chen Yulu, vice governor of the People's Bank of China (PBOC)

Ruan Jianhong, spokesperson for the PBOC and head of its statistics and analysis department

Sun Guofeng, head of the monetary policy department at the PBOC

Zou Lan, head of the financial market department at the PBOC


Shou Xiaoli, deputy head of the Press Bureau of the State Council Information Office


Jan. 15, 2021

Shou Xiaoli:

Ladies and gentlemen, good afternoon. Welcome to this press conference. This is the latest in a series of briefings on China's economic performance in 2020. We are delighted to invite Mr. Chen Yulu, vice governor of the People's Bank of China (PBOC), to introduce China's financial statistics in 2020. He will also answer some of your questions. Also present are Ms. Ruan Jianhong, spokesperson for the PBOC and head of its statistics and analysis department; Mr. Sun Guofeng, head of the monetary policy department at the PBOC; and Mr. Zou Lan, head of the financial market department at the PBOC.

Now, I give the floor to Mr. Chen Yulu.

Chen Yulu:

Friends from the media, good afternoon.

2020 was an extraordinary year. The COVID-19 pandemic - a once-in-a-century health crisis - had a severe impact on social and economic development in countries around the world. Faced with the complex domestic and international landscape, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, the People's Bank of China firmly implemented the decisions and plans made by the CPC Central Committee and the State Council, as well as the requirements set out by the financial stability and development committee under the State Council. We made comprehensive moves to push forward integrated statistical work in the financial sector and keep abreast of the epidemic dynamics and the conditions facing economic and social development. In response to the shifting situation, we adopted a flexible approach to adjust the intensity, pace, and focus of our monetary policy, thus creating a prudent and favorable monetary and financial environment for epidemic prevention and control, stability on the six fronts (employment, finance, foreign trade, inbound investment, domestic investment, and market expectations), and security in the six areas (jobs, daily living needs, food and energy, industrial and supply chains, the interests of market players, and the smooth functioning of grassroots government). On Jan. 12, the PBOC published the 2020 Financial Statistics Report. Statistics showed that in 2020, China's main financial indicators were in line with expectations, and the financial system operated smoothly.

First, the growth of money and credit supply largely met the annual target. By the end of 2020, the M2 money supply increased by 10.1% year-on-year, 1.4 percentage points higher than that in the same period during the previous year; new RMB loans totaled 19.6 trillion yuan, an increase of 2.8 trillion yuan compared to the previous year; aggregate financing in the economy grew by 13.3%, 2.6 percentage points higher than that in the same period of the previous year. Throughout the year, the PBOC reduced required reserve ratios three times, unleashing 1.75 trillion yuan in liquidity for the real economy. We launched monetary policy measures involving more than 9 trillion yuan, achieving the policy goal of "maintaining moderate monetary aggregate, and reasonable and ample liquidity."

Second, the credit structure improved as loans to manufacturing firms and MSMEs (micro, small, and medium enterprises) continued to deliver benefits and targeted financial support for key areas of the real economy increased. In 2020, the outstanding balance of medium- and long-term loans to the manufacturing sector surged by 35.2%, 20.3 percentage points higher than that in the previous year. The growth rate has risen for 14 consecutive months. Inclusive loans to small and micro companies grew by 30.3%, 7.2 percentage points higher than that in the previous year. Additionally, the financial policy to curb housing prices gradually took effect, and growth in the outstanding balance of loans to the real estate sector fell for 29 consecutive months.

Third, supply-side structural reform in finance was deepened, and financing costs for the real economy dropped significantly. In 2020, the market-based interest rate reform moved forward and the switch of the benchmark for pricing existing floating-rate loans was completed as scheduled. The interest rate reform continued to deliver benefits and the transmission of monetary policy demonstrated higher efficiency, leading to a noticeable decline in interest rates on loans to enterprises. At the end of 2020, the weighted average interest rate on enterprise loans in China was 4.61%, 0.51 percentage points lower than in the same period of the previous year and the lowest level since records began in 2015. China's financial institutions did all they could to cut financing costs for enterprises and achieved the goal of saving enterprises 1.5 trillion yuan to boost the real economy.

Fourth, we offered financial support to win the "three battles" of risk management as well as poverty elimination and pollution control and achieved remarkable results. In 2020, the battle of preventing and defusing financial risks achieved important results. All P2P platforms have been "cleared up." Various types of high-risk financial institutions have seen orderly disposal, the size of "shadow banks" was scaled down, and asset-management product risks were contracted. The interbank operating relevance and nesting saw a continued reduction, while in the meantime, the PBOC firmly supported winning the battle of poverty alleviation through precisely targeted measures. More than 6.5 trillion yuan in loans for targeted poverty alleviation were issued in the past five years, comprising loans for impoverished people and for promoting industrial development. These loans benefited more than 90 million impoverished people and helped all impoverished counties to rise out of poverty. In recent years, the PBOC has offered support for green development and ecological civilization construction by providing green financing and has gained wide acclaim from abroad. Currently, our country ranks first globally in terms of green credit and second in the scale of green bonds.

Financial statistics data is the "transcripts" of the financial system. In 2020, facing the COVID-19 epidemic that raged worldwide and stricken by external risks, people working on the financial front put the interest of the people before everything else. We faced the difficulties head on, took action, and accomplished various tasks assigned by the Party Central Committee and the State Council, contributing financial powers to accomplishing the main objectives and tasks of the 13th Five-Year Plan and to securing a decisive victory in building a moderately prosperous society in all respects. 2021 marks the first year of 14th Five-Year Plan. The PBOC will fully implement the spirit of the fifth plenary session of the 19th CPC Central Committee and the Central Economic Work Conference and will prioritize stability, emphasize work, reduce risks, deepen reform and opening-up, and offer high-quality financial support to speed up the construction of new development patterns. I will stop here. Please raise your questions. Thank you.

Shou Xiaoli:

Thanks for the instruction of Mr. Chen. Next, journalists, please state the news outlet you belong to and then ask questions.



We know that this year we need to keep the growths of broad money, or M2, and the size of social financing to match the nominal economic growth. Does this mean that the size of the money supply will increase this year? What will the M2 growth rate be like this year? Thank you.

Chen Yulu:

Thank you to the journalist from CCTV. Maintaining growth of the M2 and the size of social financing to match the nominal economic growth is an important part of improving our country's modern monetary policy frame. I want to tell you all that "basically match" doesn't mean being of the exact same amount. The growth of the M2 and the size of social financing could be slightly higher or lower than the nominal economic growth - according to the economic situations and requirements of macroeconomic governance - to reflect the counter-cyclic adjustment in medium-to-long term monetary policy. And when the economy operates irregularly, for example when suffering major epidemics similar to the one that we're currently facing, economic growth could hugely deviate from the level of potential outputs. At that point, monetary policy should be decided according to a nominal economic growth that reflects potential outputs.

In 2020, being stricken by the epidemic, the PBOC continued to implement a prudent monetary policy and didn't adopt quantitative easing and other irregular monetary policy measures. The size of the balance sheet of the central bank maintained basic stability. Moreover, the monetary policy was flexible, moderate, and precisely targeted, and better hedged against the high uncertainty in a macro situation since the outbreak of the epidemic. Financial operating maintained stability and matched the level of potential output for our economy.

In 2021, the prudent monetary policy will be more flexible and precisely targeted, as well as rational and moderate, continuing to offer the necessary support for economic recovery. The PBOC will prioritize stability and not make rash decisions, and decide the intensity, rhythm, and emphasis of monetary policy flexibly according to the characteristics of epidemic prevention and control and socioeconomic development at various stages. It will make sure money supply growth and the size of social financing match the nominal economic growth, to support continued economic recovery and high-quality development via moderate monetary growth. Thank you.



In 2020, the growth of the narrow measure of the money supply (M1) continued to rise, even by double digits in November. What's the reason for that? In 2021, will there be any changes to real estate financial policies? Thanks.

Chen Yulu:

Besides the growth of the broad measure of money supply (M2), people are also concerned about M1. At the same time, the real estate market is also the main concern for us, especially about how to financially stabilize it. The questions go to Ms. Ruan and Mr. Zou.

Ruan Jianhong:

I will answer your question about M1. As of the end of 2020, the M1 increased by 8.6% year on year to 62.56 trillion yuan, 4.2 percentage points higher than the same period in 2019, which is a relatively high growth. The demand deposits account for 90% of M1, which makes up the largest portion. According to the data on demand deposits collected by the PBOC's National Financial Basic Database, there are three major reasons for M1 growth in 2020:

First, China's prudent monetary policies have effectively supported the real economy. With structural policies supporting companies and stabilizing employment, traditional manufacturing and wholesale and retail sectors have received significant financial support. That financial support helped stabilize the cash flow for enterprises and increase their demand deposits. As of the end of last November, China's manufacturing and wholesale and retail sectors saw a year-on-year growth of 16.5%, amounting to 30% of the total demand deposits.

Second, some industries have received more fund support, but because some projects have not been fully implemented, some funds remain idle. From the statistics, industries like public management and business leasing account for a large proportion of the newly increased demand deposits. In these industries, there are some time periods between fundraising and investment, which leads to the temporary slowing of funds.

Third, the regulation of deposit products has promoted the increase in demand deposits. Since October 2019, the financial management administrations have continued to regulate products including structured deposits , and some funds have flowed into agreement deposits.

In the future, with the ease of the epidemic, the recovery of the economy, and the advance and progress of investment projects, capital spending will accelerate and the remaining demand deposits will decrease accordingly. Additionally, as the conversion from structured products into current deposits - due to regulation of deposit products - is reduced, we predict that the increase of M1 will be relatively steady.

Zou Lan:

I will answer the question concerning financial policies in the real estate sector. In recent years, adhering to the principle that the housing is for living in and not for speculation and targets for stabilizing land price, housing prices, and market expectations, the PBOC has implemented long-term mechanisms for the real estate market and intensified the financial management. We have performed our duties in the following aspects.

First, we have enhanced financial regulation in the real estate sector. We have guided the financial administrations to strengthen the monitoring and calculating of all funds flowing into real estate, allowed commercial banks to increase real estate loans at a reasonable speed, and promoted the flow of financial resources into major sectors and weak links such as manufacturing and small and micro enterprises,. Last year, the growth rate of real estate loans was lower than that of other loans for the first time in eight years. The proportion of the newly added real estate loans in all loans fell from 44.8% in 2016 to 28% last year.

Second, we have steadily implemented prudential management for real estate finance. On the one hand, we have carried out long-term mechanisms, implementing tailored housing regulations for different cities and adopting differentiated housing credit policies. On the other hand, we have prioritized rules and transparency and established fund monitoring and financing management rules for major real estate enterprises. Moreover, we have set up and improved a macro prudent management system for real estate finance.

Third, we have improved financial policies for housing rentals. Focusing on both housing purchases and renting, we have accelerated the study of financial policies to support the housing rental market. We will solicit public opinion in the days to come.

Going forward, the Central Bank will implement the deployments of the 5th Plenary Session of the 19th CPC Central Committee and the Central Economic Work Conference, and stick to the principle that "houses are for living in, not for speculation," encourage both housing purchases and rental, continue to implement tailored housing regulations for different cities so as to maintain continuity, consistency, and stability in our policies toward the real estate finance, and steadily implement the prudential management of real estate finance. We will increase financial support for the development of the housing rental market and promote the steady and healthy development of the real estate market. Thank you.


Bloomberg News:

What is the central bank's take on the renminbi's exchange rate? In the second half of last year, the renminbi exchange rate appreciated significantly against the U.S. dollar. Is there any concern that this trend will have some negative impact on exporters and the real economy? Moreover, what is the progress of Ant Group's rectification? Will it be required to break off some of its business? Thank you.

Chen Yulu:

Thank you for the two questions, both of which are issues that many are concerned about. First, I would like to invite Mr. Sun to answer your question regarding the exchange rate.

Sun Guofeng:

By the end of 2020, the exchange rate of the renminbi against the U.S. dollar had appreciated by 6.9% compared with the end of the previous year. The fluctuation range has not exceeded a historic level, such as those encountered in 2007 and 2008. The renminbi had appreciated by about 4% against a basket of currencies, with moderate annual volatility. The average exchange rate against the U.S. dollar for the whole year was 6.90 yuan, the same level as 2019. On the whole, the renminbi exchange rate remains basically stable at a reasonable level, which is in line with China's foreign trade and the fundamentals of its economy. Compared with other major currencies, the renminbi's appreciation against the dollar has also been moderate. Under the new system of a higher-level and open economy, the renminbi exchange rate is at a reasonable and equal level and the positive and negative impacts of exchange rate fluctuations on exports and the economy have been basically offset. The future trend of the renminbi exchange rate will depend on the domestic and foreign economic situation, international balance of payments, and changes in the international foreign exchange market. In general, the renminbi exchange rate will both rise and fall and the two-way floating of the renminbi will become normal. It will neither keep appreciating nor depreciating but will remain basically stable at a reasonable and equilibrium level. Thank you.

Chen Yulu:

Regarding the second question, Ant Group has set up a working group to rectify its business practices under the supervision of financial watchdogs. It is busy making a timetable for readjusting its business according to regulatory requirements. Moreover, it should maintain its business as usual and ensure the quality of financial services provided to the public. Financial regulators are maintaining close communication with Ant Group and more information and progress about the work will be updated. Thank you.


Economic Daily:

How does the People's Bank of China (PBOC) evaluate the inflation situation this year? Will the core consumer price index (CPI) remain low? Some have analyzed that the current inflation rate is underestimated because the CPI doesn't fully reflect the price changes in the market. What's the PBOC's take on this? Thank you.

Chen Yulu:

Price stability is the core objective of the monetary policy. According to the CPI data released by the National Bureau of Statistics (NBS) on Jan. 11, the year-on-year growth of the CPI in December turned from negative to positive, and 2020's annual CPI expanded 2.5% compared to the previous year. The NBS immediately interpreted this data and noted that the CPI had a relatively high growth rate on a month-on-month basis at the end of 2020, driven by the rise in pork and refined oil products prices. We had another good grain harvest in 2020, and the hog production capacity has basically recovered to the levels seen in previous normal years. Therefore, in the medium and long term, we believe that the possibility of a continuous sharp increase in month-on-month CPI growth is relatively small. Meanwhile, we do need to pay attention to changes to the core CPI. As the growth of personal income recovers, coupled with the recurrence of the epidemic in some locations and service consumption remaining constrained to some extent, the core CPI which excludes food and energy prices remains low.

Next, with China's steady economic recovery and the gradual revival of domestic consumption demand, we believe that the core CPI is expected to continue to rebound. In general, the price level in China will see a moderate rise in 2021. Influenced by the situation during this same period last year, it is predicted that the year-on-year growth of the CPI this year will rise first and then stabilize.

As for the question about whether the CPI should include changes to asset prices, this remains an important topic for academic discussion. None of the major economies in the world has directly included price changes of some specific assets in their CPI. The central bank has kept a close eye on asset prices in important sectors while paying attention to the country's price level. To effectively safeguard financial stability, we have implemented macroprudential policies to guard against macro-financial risks caused by sharp fluctuations in asset prices. Thank you.


Market News International:

I have two questions about the data. The social financing data released by the central bank shows that the figure for bad loan write-offs is different from that given by the China Banking and Insurance Regulatory Commission. Why for this? In addition, what is the approximate proportion of entrusted loans, trust loans, and bill financing - all categorized as social financing - combined in the total shadow banking? Could you please introduce the overall size of China's shadow banking? Thank you.

Chen Yulu:

Thank you. You have studied our data very carefully. Ms. Ruan will answer your questions involving the structured data.

Ruan Jianhong:

Let me start by answering your first question. As you noted, according to data released by the People's Bank of China (PBOC) on aggregate social financing, the volume of loans written off amounted to 764.4 billion yuan in the first three quarters of 2020. During the same period, the disposal of non-performing loans reached 1.7 trillion yuan, according to data released by the China Banking and Insurance Regulatory Commission (CBIRC). The two figures released by different sources do not match exactly, since the former is part of the latter. Apart from write-offs, non-performing loans can be disposed of through other means including transfers, payments-in-kind and securitization.

Regarding your second question, you asked whether the aggregate social financing data includes shadow banking businesses. In fact, entrusted loans and trust loans, which we frequently mention, are not all covered by shadow banking. For example, entrusted loans under the housing provident fund scheme are not shadow banking activities. Current aggregate social financing data show that entrusted loans and trust loans totaled 12 trillion yuan, not including the 5.4 trillion yuan of housing provident fund loans.

Shadow banking refers to activities performed by credit intermediary institutions outside the banking system, which are subject to lower levels of regulatory oversight and higher risks, such as some private equity funds, part of entrusted loans and trust loans, non-standard asset investment by financial products, and so on. The volume of these businesses, after removing double counting, currently stands at about 32 trillion yuan, which is 2 trillion yuan lower than at the end of 2020. Thank you.


Hong Kong's Bauhinia Magazine:

In 2020, financial institutions made 1.5 trillion yuan in interest concessions to boost the real economy. What measures were taken to achieve this? Will you issue new policies to encourage interest concessions by financial institutions in 2021? Thank you.

Chen Yulu:

I would like to invite Mr. Sun Guofeng to answer your questions.

Sun Guofeng:

In 2020, the PBOC fully implemented the decisions and plans of the CPC Central Committee and the State Council. Working together with relevant authorities, we guided the financial system to make 1.5 trillion yuan in interest concessions to boost the real economy. The measures included lowering interest rates, cutting fees, and deferring repayments of principal and interests of loans.

First, we deepened reform on the loan prime rate (LPR) to bring lending rates down further, saving enterprises a total of 590 billion yuan. The one-year LPR fell 30 basis points, lowering the annual lending rate in 2020 by 0.5 percentage points compared with 2019 and saving enterprises 560 billion yuan. Also, we successfully completed LPR switch of outstanding floating interest rate loans by the end of last August, saving enterprises 28 billion yuan by direct interest rate cuts during the switch and falling LPR after repricing.

Second, we offered re-lending and rediscount quotas to support cheaper loans, saving enterprises 46 billion yuan. The PBOC increased re-lending and rediscount quota by 1.8 trillion yuan in three batches, enabling financial institutions to issue loans with competitive interest rates. All the quota had been used by the end of 2020.

Third, the downward trend in bond interest rates has provided approximately 120 billion yuan in profits to bond issuers. Meanwhile, interest rates of newly issued national bonds, local bonds, and corporate credit bonds in 2020 are 0.47 percentage points lower than in 2019.

Fourth, the two direct tools made a profit of 380 billion yuan. Last year, the inclusive small and micro-enterprise loan extension support tool provided 358 billion yuan in profits for enterprises by reducing corporate interest expenditures and bridge costs. The inclusive small and micro-credit loan support program saved 24 billion yuan in guarantee costs for enterprises. The China Banking and Insurance Regulatory Commission has also guided banks to transfer profits by urging them to reduce fees, support corporate restructuring, and make debt-to-equity swaps. These transfers are expected to secure around 420 billion yuan. The total amount of money accrued from the above measures indicates that 1.5 trillion yuan has been successfully transferred to the real economy.

In the next stage, the People's Bank of China will insist on seeking progress while maintaining stability, do well to create cross-cycle policy design, deepen reforms in interest rate marketization, continue to release LPR reforms potential, consolidate achievements via the reduction of real interest rate on loans, and promote the steady decline of corporate financing costs. Thank you.


South China Morning Post:

US President-elect Joe Biden has announced an economic stimulus package of $1.9 trillion. How does the central bank view the possible impact of the new US stimulus package on China's economy and finance? In addition, Chair of the Federal Reserve Jerome Powell recently stated that the US government will not raise interest rates in the short term. Is the central bank worried that long-term external ultra-low interest rates or even negative interest rates will deteriorate China's international financial environment since China is still the only major economy to adopt a normal monetary policy? Thank you.

Chen Yulu:

This question is about the latest update. First, Mr. Sun Guofeng will answer from the perspective of monetary policy operations and then I will elaborate on his answer.

Sun Guofeng:

We understand that a new fiscal stimulus plan in the United States is ready to be introduced, and the global financial market has already responded to this. US inflation expectations have risen and the US treasury bond yields have rebounded sharply. Meanwhile, the US dollar has appreciated against other major currencies and the RMB has also recently depreciated against the US dollar. It should be noted that the RMB exchange rate depreciated in the first half of 2020, then appreciated in the second half of the year. Again, RMB exchange rate has recently depreciated against the US dollar. These fluctuations are normal, indicating that market supply and demand have played a decisive role in the formation of the exchange rate. The flexibility of the RMB exchange rate has increased, risen, and fallen, and two-way floating has become the norm. It has played the role of an automatic macroeconomic stabilizer and has created conditions for the central bank to independently implement normal monetary policies as per China's economic situation. At the same time, we have strengthened international macroeconomic policy coordination. China is the only major economy in the world to achieve positive economic growth in 2020 and it is also one of the few major economies that implement normal monetary policies. It has promoted the recovery of the global economy, which is conducive to the normalization progress of the monetary policy of other major economies in the future. Thanks.

Chen Yulu:

The strict prevention of external financial risks was specially raised at a recent work meeting by the People's Bank of China. The main external financial risks we need to be alert to are the slowing-down of the global economic recovery, the resulting pressure to the real economy, and vulnerability to the financial system. The risks we are facing include: First, decoupling from the basic real economy in the international market and increasing fluctuation. Second, volatility or fluctuations in cross-border capital flow against a background of highly relaxed global liquidity. Third, with the unprecedented impact on the economy caused by the pandemic, low-income countries are confronting a rising debt crisis which may further affect the global economic recovery.

In the face of these three external risks, we will continue to prioritize domestic efforts. First, we will maintain the consistency, stability and sustainability of macro-economic policies, thus laying a solid foundation for China's basic economy. Second, we will improve the financial monitoring system and enhance the ability of macro-prudential management as well as the ability of systematic risk prevention and control. Meanwhile, we will increase coordination of international macro-economic and financial policies via global platforms such as the G20, in a bid to create favorable conditions for a further global economic resurgence. Thank you.


How should we understand the need for "prudent monetary policy" to be flexible, accurate, reasonable and moderate? And, how should we view the follow-on measures of reducing reserve requirement ratio and interest rates? Thank you.

Chen Yulu:

Sun Guofeng, director general of the Monetary Policy Department of the People's Bank of China, will answer your questions.

Sun Guofeng:

China's economy is back on the right track with a stronger internal driving force and better economic indicators. Due to the COVID-19 pandemic and uncertainties in the external environment, the global economic and financial situation is still complicated and the foundation of economic recovery is still unstable. Our monetary policy should support the real economy while striking a balance between economic recovery and risk prevention. Therefore, China will prioritize stability in its monetary policy in 2021. A prudent monetary policy should be flexible, precise, reasonable, moderate, and sustainable.

China will use a comprehensive range of monetary policy tools, such as reserving requirement ratio, re-lending, and re-discount, medium-term lending facility, and open market operations to maintain liquidity at a reasonably ample level, ensure that the growth of the broad money supply and social financing basically matches nominal economic growth, and make flexible policy adjustments in accordance with changes in the situation.

China will give full play to the "drip irrigation" function of monetary policy tools and step up efforts to effectively support the real economy. On one hand, we will prudently adjust and carry on the emergency policies like the two recent monetary policy tools that aim to boost the real economy. On the other hand, we will innovate and implement new monetary policy tools to provide financial support to scientific innovations, small and micro-sized businesses, and green development.

We will deepen reform of the financial system, continue to promote liberalization of interest and exchange rates, improve the transmission mechanism of monetary policy, and establish a market-based interest rate system. We also aim to promote the steady decline of comprehensive financing costs, deepen LPR reform, maintain a lowered interest rate on loans, improve the flexibility of RMB exchange rate, strengthen the macro and prudent management of cross-border capital flow, stabilize market expectations, establish a "risk-neutral" attitude among businesses and financial organizations, and maintain basic stability in the RMB exchange rate.

You asked a question about the reserve ratio and interest rate. About the interest rate, we should pay more attention to the changes in the real interest rate. Since 2020, the People's Bank of China has adopted reform measures to reduce financing costs for companies, which has proved quite effective.

China's corporate lending rate was 4.61% in December 2020, down 0.51 percentage points year on year, an all-time low and a larger drop than LPR. Furthermore, declining loan interest rates pushed banks to reduce the cost of debt, forcing saving rates to drop. The three-year and five-year weighted average deposit interest rates have dropped to 3.67% and 3.9% respectively, down five and 16 basis points year on year. The current economy has returned to a potential output level, with a strong demand for business loans and a reasonable growth in currency credit, indicating that the current interest rate level is appropriate.

Regarding the reserve requirement ratio, the People's Bank of China lowered the ratio three times in 2020, releasing 1.75 trillion yuan in liquidity. Since 2018, the People's Bank of China has altogether cut the reserve ratio 10 times, releasing a total of 8 trillion yuan in liquidity. Now, the average reserve ratio for all Chinese financial institutions is 9.4%, while for over 4,000 medium- and small-sized financial institutions, the ratio is 6%. Whether compared with other developing countries or compared with China's historical reserve ratio, the current deposit reserve ratio is not high.

Next, the People's Bank of China will adopt a comprehensive range of monetary policy tools to provide short, medium, and long-term liquidity in accordance with the changes in economic and financial situations, maintain liquidity at a reasonably ample level, and ensure that the growth of broad money supply and social financing basically matches nominal economic growth. We will continuously deepen our reform toward a more market-oriented interest rate, maintain the lowered real interest rate in loans, promote the steady decline in corporate financing costs, and provide a sound monetary policy environment for high-quality economic development. Thank you.


Red Star News:

In 2020, China's real economy, especially small and micro-enterprises, has been severely affected by the epidemic. What measures has the PBOC taken to support the development of small and micro-enterprises? What is the next step? Thank you.

Chen Yulu:

Thank you for bringing up this important issue. Supporting the stable development of small and micro-enterprises is a focus of PBOC and the financial system. As you mentioned, the COVID-19 has made life harder for small and micro-enterprises in 2020. Small and micro-enterprises are key market entities as we stabilize enterprises and ensure employment. The PBOC has resolutely implemented the decisions and deployments of the CPC Central Committee and the State Council and promptly introduced policy measures in four aspects, in coordination with relevant ministries, to firmly support the financing and stable development of small and micro-enterprises. Generally speaking:

First, we have innovated two monetary policy instruments to channel funds into the real economy. Last June, we introduced a policy to allow small and micro-enterprises to postpone principal and interest repayments on loans and rolled out a credit loan support program. These two instruments, funded by the PBOC, encouraged banks to defer payments on all-inclusive loans for small and micro-enterprises eligible for the policy accordingly and substantially increase credit loans. In the past year, the banking industry deferred on principal and interest payments totaling 7.3 trillion yuan and issued 3.9 trillion yuan in inclusive credit loans to small and micro-enterprises, an increase of 1.6 trillion yuan from the same period last year.

Second, we have built up preferential policy support for small and micro-enterprises in key areas. We have led efforts to introduce 30 measures to help fight the epidemic in the financial sector, set up a special re-loan project of 300 billion yuan for epidemic prevention and control, and bolstered support targeting more than 7,600 key enterprises in charge of epidemic prevention and supply delivery, most of which are SMEs. Per the needs of epidemic prevention and control, we have launched further re-lending and re-discount quotas of up to 500 billion yuan for the resumption of work and production and increased inclusive re-lending and re-discount quota by one trillion yuan. More than 600,000 companies affected by the COVID-19 received financial support, most of which are also micro-, small and medium-sized enterprises (MSMEs).

Third, we have enhanced commercial banks' capabilities in providing financial services for micro- and small businesses. The PBOC has actively urged commercial banks to improve their resource allocation and performance evaluation mechanisms for small and micro-enterprises and increase the weight of inclusive finance for commercial banks to more than 10%. Credit loans, first-time loans, and loan renewals without repayment of the principal have been substantially increased. Among the newly granted inclusive credit loans for inclusive small and micro-businesses in the first 11 months of last year, nearly 40% of the enterprises were granted for the first time.

Fourth, we have followed a cohesive policy to improve monetary, regulatory, fiscal and taxation, and other external policy incentives. We have worked to play a better role as a government financing guarantee institution and improve local risk-sharing and compensation mechanisms. We have implemented comprehensive policies to improve financial services for small and micro-enterprises. At the same time, we have also actively promoted the construction of enterprise credit information sharing platforms to promote the sharing of credit information among small and micro-enterprises. The accounts receivable financing platform operated by the PBOC's Credit Reference Center offered 2 trillion-yuan fund loans for MSMEs throughout the year, exceeding the annual target of 800 billion yuan.

Overall, we did a good job in financing small and micro-enterprises last year by increasing loans to more enterprises and reducing costs. By the end of last year, outstanding loans issued to small businesses under inclusive finance services stood at 15.1 trillion, up 30% year on year. Interest rates for newly granted loans to small and micro-enterprises in December were 5.08%, down 0.8 percentage points from the same period last year. In 2020, a total of 32.28 million businesses were supported, an increase of 5.24 million from the previous year.

Next, the PBOC will maintain the continuity, stability, and sustainability of policies in accordance with the deployment of the Central Economic Work Conference, continue to make good use of structural monetary policy instruments and targeted credit policies and give full play to the national accounts receivable financing platform and unified registration for pledges of movable assets and rights. This way, we will continue to strengthen support for small and micro-enterprises. Thank you.

Shou Xiaoli:

Thank you, Mr. Chen, and all the other speakers. Thanks to friends from the media. Today's SCIO press conference is hereby concluded. I wish you all a happy weekend!

Translated and edited by Liu Sitong, Zhou Jing, Liu Jianing, Cui Can, Zhang Junmian, Li Xiao, Wang Zhiyong, Zhang Rui, Fan Junmei, Zhang Tingting, Guo Yiming, Wang Yiming, Li Huiru, He Shan, Gong Yingchun, Wang Qian, Zhang Liying, Wang Wei, Xu Xiaoxuan, David Ball, and Tom Arnstein. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.

/6    Shou Xiaoli

/6    Chen Yulu

/6    Ruan Jianhong

/6    Sun Guofeng

/6    Zou Lan

/6    Group photo