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Read in Chinese

Speakers:

Liu Guiping, deputy governor of the People's Bank of China (PBC)

Wang Xin, head of the Research Bureau at the PBC

Sun Guofeng, head of the Monetary Policy Department at the PBC

Zou Lan, head of the Financial Market Department at the PBC

Chairperson:

Chen Wenjun, head of the Press Bureau of the State Council Information Office (SCIO) and spokesperson of the SCIO

Date: 

April 1, 2021

Chen Wenjun:

Ladies and gentlemen, good afternoon. Welcome to the press conference held by the State Council Information Office (SCIO). The fifth plenary session of the 19th Central Committee of the Communist Party of China (CPC) established a comprehensive overall plan for coordinated regional development, and the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035 also reflected the guiding principles of the session. The finance sector plays a crucial role in promoting coordinated regional development under the new development paradigm. Today, we have invited Mr. Liu Guiping, deputy governor of the People's Bank of China (PBC) to brief the media on relevant issues and field questions. With us, we also have department heads from the PBC, including Wang Xin, head of the PBC's Research Bureau; Sun Guofeng, head of the Monetary Policy Department; and Zou Lan, head of the Financial Market Department.

Next, I will give the floor to Mr. Liu.

Liu Guiping:

Ladies and gentlemen, friends from the media, good afternoon. The fifth plenary session of the 19th CPC Central Committee clearly proposed accelerating the construction of a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. This is a major decision made by the CPC Central Committee with Comrade Xi Jinping at its core, after evaluating the situation based on the changes in China's development stage, environment and conditions, as well as changes in its comparative advantages in particular.

The conditions necessary for achieving smooth economic circulation are the matching of supply and demand, coordination between regions as well as between urban and rural areas, and domestic and international circulations reinforcing each other. Among these, promoting coordinated regional development is an important foundation for accelerating the fostering of a new development paradigm, which ensures social harmony, political stability and sustainable economic development. During the 13th Five-Year Plan period (2016-2020), the PBC adhered to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, resolutely implemented the decisions of the CPC Central Committee and the State Council, and followed the new development philosophy. Working with other relevant departments, we have improved the regional financial policy system, actively provided financial support for the country's major regional development strategies, and continuously enhanced regional development coordination.

First, we have developed a dialectical approach to thinking and promoted regional economic planning featuring complementary advantages and high-quality development. General Secretary Xi Jinping has emphasized on several occasions that imbalances are common, and we should pursue a relative balance between regions — this is a dialectical approach to coordinated regional development. On one hand, serving the implementation of China's major regional development strategies, the PBC has given full play to the functions of the central bank, and deployed financial vehicles to support coordinated development in the Beijing-Tianjin-Hebei region, the Yangtze River Economic Belt, the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Delta, ecological protection and high-quality development in the Yellow River basin, and the construction of the Chengdu-Chongqing Twin City Economic Circle. We have guided financial institutions to improve financial service innovation, and promoted leveraging the role of city clusters in driving growth. On the other hand, we have flexibly tapped into monetary and credit policy tools, made full use of financial technology, and actively carried out pilot programs for the reform and innovation of modern inclusive finance and green finance, built and improved a modern inclusive financial system and green financial system, and guided rural areas and underdeveloped areas to make up for their weaknesses, and promoted green, low-carbon and high-quality economic development.

Second, we have adhered to a problem-oriented approach, formulated differentiated policies tailored to local conditions, and provided category-specific guidance. According to the characteristics and comparative advantages of different regions, targeted pilot regional financial reforms have been carried out. Positive results have been achieved in fields such as inclusive finance, green finance and science and technology finance, giving rise to a set of practices that can be applied in other areas.

Third, we have taken into account both domestic and international dynamics and leveraged these two markets and resources. The pilot free trade zones are pacesetters of reform and opening up in the new era, and testing grounds for a high level of financial openness, which serve as a platform for tapping into both domestic and international resources. Among the 21 pilot free trade zones and Hainan Free Trade Port approved by the State Council, financial liberalization and innovation is one of the highlights, covering important elements such as the facilitation of cross-border investment and financing, the optimization of financial institutional arrangements and the innovation of cross-border financial services.

Next, the PBC will actively implement the guiding principles of the fifth plenary session of the 19th CPC Central Committee and the Central Economic Work Conference. As China enters a new development stage, we will follow a new development philosophy, foster a new development paradigm and pursue higher-quality growth. We will continue to bolster financial support for coordinated regional development, and advance regional financial reforms with distinctive features.

First, we will continue to increase financial support for the country's major regional development strategies. In accordance with local conditions, financial support will continue to be provided to promote the implementation of various strategies, including coordinated development in the Beijing-Tianjin-Hebei region, the Yangtze River Economic Belt, the Guangdong-Hong Kong-Macao Greater Bay Area and the Yangtze River Delta, ecological protection and high-quality development in the Yellow River basin, and the construction of the Chengdu-Chongqing Twin City Economic Circle. We will enhance the quality and effectiveness of financial services for the real economy and coordinated regional development.

Second, we will continue to make overall planning and work on pilot zones for regional financial reform. Financial reform and innovation with regional characteristics will be strengthened. We will select eligible areas to promote pilot projects covering such areas as technology innovation finance, inclusive finance and green finance, and explore effective ways of providing financial support for high-quality development such as scientific and technological innovation, rural vitalization and green development.

Third, we will continue to promote financial liberalization and innovation in the pilot free trade zones and promote domestic and international circulations reinforcing each other. Starting from serving the real economy and promoting the liberalization and facilitation of trade and investment, we will focus on providing financial support for the construction of pilot free trade zones and free trade ports, promote the full implementation of the system combining pre-establishment national treatment and a negative list, and strive to achieve a high level of opening up. Thank you everyone.

Chen Wenjun:

Thank you, Mr. Liu. The floor is now open for questions. Please state the name of your news outlet before asking your questions.

CCTV:

In recent years, PBC has carried out a series of pilot programs on regional financial reforms, – covering key fields such as green finance and inclusive finance – in the Guangdong-Hong Kong-Macao Greater Bay Area, the Yangtze River Delta and other hotspot areas. What progresses have been made in these pilot programs? What experience did you gather that can be rolled out across the country? Thank you.

Liu Guiping:

Thanks for your questions. I gave a brief introduction previously, and would like to introduce some details now.

As China's central bank, PBC always follows the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the major decisions and plans of the CPC Central Committee and the State Council. In accordance with the needs of macro-economic development and deployments of regional development strategy, we promote relevant works in accordance with our functions as the central bank.

I have just introduced several major strategies regarding regional development, and perhaps you may have noticed that the order in which I said them is the order of several major strategies deployed by the Party Central Committee and State Council, including the Beijing-Tianjin-Hebei region, the Yangtze River Economic Belt, the Guangdong-Hong Kong-Macao Greater Bay Area, the integration of the Yangtze River Delta, the ecological protection and high-quality development of the Yellow River Basin, and the Chengdu-Chongqing Twin City Economic Circle. I'd like to introduce our works on pushing forward regional development from the perspective of the five development philosophies stressed by General Secretary Xi Jinping.

First, we implemented the philosophy of innovative development. We have promoted the reform and innovation of sci-tech innovation finance and actively explored an effective model for finance to support science and technology innovation. For example, we explored six special development models at East Lake High-tech Development Zone in Wuhan city, with the aim of building investment and financing channels to serve the whole life cycle of science and technology enterprises. The development models include institution establishment, operational mechanisms, financial products, information platforms, direct financing and financial supervision. All the experience we learned has been spread across the country.

Second, we implemented the philosophy of coordinated development. We actively promoted and supported major strategies for regional development. For example, we accelerated the building of Shanghai into an international financial center and high-quality and integrated development of the Yangtze River Delta, so as to give full play to the leading role of Shanghai as an international financial center. We made great progresses in streamlining administration, delegating power, improving regulation and upgrading services of the finance industry, coordinating supervision of credit agencies, and sharing economic and financial information. At the same time, when providing financial services for the construction of Guangdong-Hong Kong-Macao Greater Bay Area, we innovated cooperation models between the Chinese mainland and Hong Kong and Macao, and promoted cross-border mobile payment facilitation, trials of account opening witness service and cross-border purchase of wealth management products by residents in the Guangdong-Hong Kong-Macao Greater Bay Area – which is now in the process of moving forward. We also upgraded financial services in the area, and achieved positive results in finance related to people's livelihoods, facilitation of cross-border investment and financing, and financial market connectivity.

Third, we implemented the philosophy of green development. We propelled the construction of pilot zones of reform and innovation of green finance in six provinces and regions. The six provinces and regions are Zhejiang, Jiangxi, Guangdong, Guizhou and Gansu provinces and Xinjiang Uygur autonomous region. By the end of last year, the loan balance of green finance in these six provinces and regions reached 236.83 billion yuan, accounting for 15.1% of their total loan balance, and 4.3 percentage points higher than the national average. Bond balance of green finance in these places reached 135 billion yuan, up 66% year-on-year. Ganzhou New Area in Jiangxi province successfully issued the country's first authenticated green municipal special bond. Huadu district in Guangzhou developed several financial products such as carbon emissions rights mortgage and pledge financing.

Fourth, we implemented the philosophy of open development. We advanced financial opening and innovation in free trade zones, and forged a new paradigm of financial innovation. At present, there are 21 free trade zones throughout China. The experience we have spread across the country include more than 10 new businesses of local and foreign currency, such as macro-prudential management of full-diameter cross-border financing with the integration of local and foreign currencies; cross-border two-way RMB capital pool of transnational enterprises and groups; and simplified RMB settlement process for regular and direct investments.

Fifth, we implemented the philosophy of shared development. We promoted reform and innovative trials for inclusive finance and micro-finance, and significantly improved the coverage and accessibility of financial services. Taizhou city in Zhejiang province and Lankao county in Henan province solved issues relating to agriculture, rural areas, and rural people, information asymmetry and difficulties faced by small and micro-businesses in accessing affordable financing by making good use of financial technology. Taizhou has earned experience in financial services for small and micro-enterprises by focusing on real entities, services for small and micro-enterprises, and utilizing an accurate supply and stable operation. Lankao explored a new development model of inclusive finance with digital service platforms as the core. Thank you.

China Financial and Economic News:

Accelerated constructionof Shanghai as an international financial center and the integrated development of the Yangtze River Deltaregion are major development strategies established by the CPC Central Committee. What has the People's Bank of China (PBC) done in this regard? Thank you.

Liu Guiping:

Thank you for your question. Mr. Wang will answer this question.

Wang Xin:

Thank you for your question. Shanghai and the Yangtze River Delta area are the regions with the most dynamic economy, the highest level of development and the highest degree of opening-up in China. Accelerating Shanghai's development as an international financial center and providing sound financial support for the integrated development of the Yangtze River Delta region are important measures in creating a new highland of high-level opening-up. Last February, when Chinese society was hit hard by the epidemic, upon the approval of the State Council, the PBC, along with the China Banking and Insurance Regulatory Commission (CBIRC), China Securities Regulatory Commision (CSRC), State Foreign Exchange Administration (SAFE) and Shanghai Municipal People's Government, released the Opinions on Further Accelerating the Development of Shanghai as an International Financial Center and Providing Financial Support for the Integrated Development of the Yangtze River Delta Region. This is a major document, which lays out 30 specific measures covering all aspects of financial reform and opening-up. Some of the key points and highlights include increasing the green assets allocation of financial institutions, since it is very important at present for these institutions to increase green financial assets, fulfill their social responsibilities, and make sustainable investments. The Opinions also promotes the integrated establishment of green financial service platforms and the integrated development of credit investigation in the Yangtze River Delta region, which as a basic task, is essential for unified economicand financial development in the region. The Opinions also states that an inclusive financial index system and an alternative dispute resolution mechanism for financial consumption disputes should be set up in the region. In addition, Shanghai and the Yangtze River Delta region, with their relatively developed finance and science and technology, lead the country with regard to science and technology innovation. For example, in terms of getting listed on the Science and Technology Innovation Board, or STAR Market, be it the enterprises applying for listing or enterprises finally getting listed on the Market, enterprises from the Yangtze River Delta region account for nearly 50% of the country's total. Such a large proportion shows us the importance of the economy and finance of the region, including Shanghai.

Next, the PBC will continue to promote implementation of the Opinions, and many measures in it need our increased efforts to be carried out more quickly. We will step up efforts to further the development of green finance, integration of credit investigation, and establishment of an inclusive financial index system and an alternative dispute resolution mechanism for financial consumption disputes in the Yangtze River Delta region to promote the region's integrated development. Thank you.

Market News International:

How will the central bank solve the problem of unbalanced distribution of credit resources among different regions? In addition, medium- and long-term loans to enterprises in China continue to rise, while investments in the manufacturing sector remain sluggish. What is the main reason for this and how can the issue be dealt with?

Liu Guiping:

Thank you for your questions. Mr. Zou will answer this question.

Zou Lan:

Thank you for your questions. We have also noticed that investments in manufacturing have been sluggish. Investments in the manufacturing sector fell by 2.2% year-on-year in 2020, for which we think there are many reasons. First, affected by the external economic environment and the COVID-19 pandemic, the liquidity of manufacturing enterprises was strained and so loans were mainly used to meet the liquidity demand. The enterprises' investment ability and confidence need to be restored.

Second, it is related with adjustments to the industrial structure. With the strong support of national policies, investments in high-tech manufacturing industries have grown rapidly, but the proportion of these industries in the whole manufacturing sector remains relatively limited.

Third, as manufacturing enterprises turn to an assets-light strategy, their investment needs have shifted. These enterprises have begun to lease, instead of purchase, plants and equipment, and the new business model of shared manufacturing is making gradual progress, which has caused relatively big changes in the enterprises' investment demands. To support the high-quality development of the manufacturing industry, the PBC, following the arrangements of the CPC Central Committee and the State Council, has strengthened macro-prudential assessment, enhanced policy coordination and cooperation, and taken multiple measures together with other financial departments in recent years, which have promoted the substantial growth of medium- and long-term loans in the manufacturing industry. At the end of this February, the medium- and long-term loan balance of the manufacturing sector stood at 5.62 trillion yuan, up by 38.8% year-on-year and registering an increasing growth rate for 16 consecutive months, reversing the previous sluggish growth rate. Financial support for the manufacturing industry is paying off, and we believe this can drive investment in manufacturing to some extent.

We have also noticed the problem of unbalanced credit supply in different regions. We are analyzing the relevant issues and will take appropriate measures to solve the issue. Thank you.

Jiemian News:

The fifth plenary session of the 19th CPC Central Committee proposed establishing a modern central banking system. The modern monetary framework is an important part of modern central banking system. What aspects are the PBC considering for improving the modern monetary framework to support high-quality development during the 14th Five-Year Plan period? Thank you.

Liu Guiping:

Thank you for your question. I'd like to invite Mr. Sun Guofeng to answer this question.

Sun Guofeng:

Thank you for your question. The fifth plenary session of the 19th CPC Central Committee proposed that the 14th Five-Year Plan set the promotion of high-quality development as its theme. As such, the currency value must be kept stable and a sound monetary and financial environment can be provided for high-quality development. The monetary policy should be in accordance with the ultimate target stipulated by the Law of the People's Bank of China, which is "maintaining the stability of the currency value and thereby promoting economic growth." Keeping the currency value stable has both internal and external meanings. The internal meaning is to maintain price stability and to manage liquidity well. The annual Central Economic Work Conference in 2020 and the Outline of the 14th Five-Year Plan (2021-2025) for Economic and Social Development and the Long-Range Objectives Through the Year 2035 clearly state that the intermediate goal of monetary policy is maintaining the growth rate of money supply, and social financing basically matching the nominal economic growth rate, thus specifying the "anchor" of the monetary policy framework. In recent years, the PBC has promoted the quoted interest rate in the loan market, which is the loan prime rate (LPR) reform, and the transmission efficiency of monetary policy has been significantly improved. As the benchmark rate in the credit market, LPR has played an important role in adjusting credit supply and demand, thereby affecting the money supply. Maintaining LPR at a reasonable level is conducive to stabilizing the "anchor" of the money supply. Therefore, LPR is not only an important part of the market-based interest rate formation and transmission mechanism, but also a key component of the money supply control mechanism. LPR is formed based on policy rate quotes. By improving the policy rate system which employs the open market operations (OMOs) rate as the short-term policy rate and employs the medium-term lending facility (MLF) rate as the medium-term policy rate, the PBC has guided the market rate represented by DR007 to hover around the policy rate. The PBC has also improved the market-based interest rate formation and transmission mechanism from policy rate to LPR to the effective interest rate on loans, and by joining with improvements on money supply control mechanism as an organic whole, it has established the modern central banking system.

The external meaning of maintaining currency value stability is to keep the RMB exchange rate basically stable at an appropriate and balanced level. As such, it is necessary to enhance the RMB exchange rate flexibility, strengthen the macro-prudential management of cross-border capital, guide social expectations, and strike a balance between internal and external equilibriums. Thank you.

Hong Kong Economic Herald:

What is the progress of the cross-border digital currency project being jointly promoted by the PBC and the Hong Kong Monetary Authority? During the 14th Five-Year Plan period, what measures will the central bank take to support Hong Kong in consolidating its position as an international financial center? Thank you.

Liu Guiping:

Mr. Wang Xin will answer this question.

Wang Xin:

Thank you for your question. China's digital renminbi (RMB) is mainly designed for domestic retail payments. However, when the conditions are suitable, if there is such a demand in the market, the use of digital RMB for cross-border transactions can also be accomplished. In the early stages, the PBC's digital currency research institute and the Hong Kong Monetary Authority (HKMA) conducted technical tests on the cross-border use of digital RMB in the mainland and Hong Kong, which was a routine R&D test for the RMB pilot. The digital RMB is being tested in several regions and scenarios across China, including at the Winter Olympic Games. There have been more and more diverse test scenarios for the digital RMB. At the same time, we have also been working with the HKMA to carry out certain technical tests on its cross-border use. Recently, with the support of the Bank for International Settlements' Innovation Hub Hong Kong Centre, the PBC's digital currency research institute and the HKMA, the Bank of Thailand and the United Arab Emirates have jointly initiated a research project on multilateral central banks' digital currency bridges, which aims to explore the use of distributed ledger technology to realize round-the-clock simultaneous settlement in cross-border transactions of central bank digital currency pairs, that is payment-versus-payment (PvP) link. Central bank digital currency has been a hot topic internationally. Many central banks have been conducting research and explorations, and similar cooperation projects have been carried out between different central banks. So, the PBC has also been exploring the feasibility of digital RMB. Thank you.

Yicai: 

From the latest meeting of the Federal Reserve, we can see that their monetary policy seems to be a little bit dovish, but U.S. bond yields continue to climb, and inflation expectations in the U.S. are also very strong. Now many analysts think that the Federal Reserve will raise interest rates or reduce its balance sheet in advance. Some worry that there may be spillover effects. What will be the effects? What's your opinion on that? Thank you.

Liu Guiping:

Thank you for your question. This question draws wide attention nowadays. I will invite Mr. Sun to answer this question.

Sun Guofeng:

Thank you. In 2020, China was the only major economy in the world to register positive growth and one of the few major economies to adopt normal monetary policies, which not only advanced the global economic recovery but also supported the normalization of monetary policies of other major economies. We have noticed that the U.S. treasury yield increased to over 1.75%, which drove the appreciation of the dollar. The U.S. dollar index has risen by 3.6% since the beginning of this year. Affected by that, some emerging economies face rising risks in repaying debts and refinancing. The pressure of currency devaluation amounts. Some economies raise their interest rates and fluctuations occur in the financial market. China has always stuck to normal monetary policies. From February to April last year, we took rather strong measures in response. After May of 2020, the monetary policies returned to normal, which greatly bolstered anti-epidemic prevention and control, and social and economic development, while not resorting to a deluge of excessive stimulus policies. We can see that China's national debt yield has remained stable since the recovery, and the free floating of renminbi exchange rate has become a normality, which serves as an automatic stabilizer for the macro economy and international balance of payment. Therefore both the massive monetary stimulus measures introduced by the Fed last year and future adjustments to monetary policy by the Fed will have relatively little impact on China's financial markets. In fact amidst the recent sharp volatility in global financial markets, especially in emerging economies, China's financial markets are running smoothly, the RMB exchange rate is floating freely and the 10-year Treasury yield is currently around 3.2%, which is still lower than the previous period. The positive effects of China's normal monetary policies have been delivering results. As the next step, the key is to get our own affairs in order. We will adopt stable monetary policies, retain our focus, and cherish the space for normal monetary policy. Meanwhile, we will keep a close eye on changes to the international economic and financial situation, increase the exchange rate's flexibility, coordinate international macro policies in line with China's conditions, and maintain a good macro policy leadership posture. We are pleased to see other economies seeking to return to normal monetary policy, which is beneficial to the long-run sound development of global economy. Thank you.

CNBC:

I have two questions. My first question is regarding real estate debt and the stock market. Which represents the bigger financial challenge and what measures will be taken? The second question is about the digital currency issued in Beijing and Chengdu this year. What achievements have been made and what adjustments are needed? Thank you.

Liu Guiping:

Thank you for your question. The first question concerning challenges and relevant markets goes to Mr. Zou. The second question regarding digital currency goes to Mr. Wang.

Zou Lan:

Thank you for your question. Over the past three years, according to the decisions and arrangements of the CPC Central Committee and the State Council, under the coordination of the Financial Stability and Development Committee under the State Council, the financial system has fully enforced all tasks and plans in the critical battle to forestall and defuse financial risks, and achieved results in the current stage. On the whole, the risks of the financial system have tended to shrink. China's financial risks are accumulated over many years and caused by systematic, mechanistic, cyclical and behavioral factors. Currently, the macro environment remains complex and severe, and the fluctuations of international capital flow are large due to the uncertainty brought by the epidemic. Shocks overseas cause fluctuations in the domestic financial market. The stock market, bond market, and bulk commodities market are exposed to the risks of oscillation. A small number of large-scale enterprise groups are still in a period of risks being exposed. Middle and low-quality enterprises still have difficulties in financing and the debt default risk is relatively high. The upward pressure on property prices is still large in some popular cities. Potential risks such as debt default among highly-leveraged medium- and small-sized real estate enterprises worth watching.

Facing the risks, in the next stage of normalizing the forestalling and defusing of financial risks, the financial management department will focus on key sectors and resolve existing risks. We will also improve mechanisms and systems, and perfect the financial risk prevention system and early warning system, to increase the activeness and foreseeability in financial risk prevention and control with a holistic view. We will resolutely guard against systemic risks to provide a good financial environment for sustained economic recovery and high-quality development.

Thank you.

Wang Xin:

The market has a great deal of interest in the digital RMB, and there is a great deal of concern. On the one hand, this has to do with the fact that more and more central banks around the world are getting involved in developing their own digital currencies. On the other hand, it may also be related to the jump in the prices of Bitcoin some time ago. The People's Bank of China has steadily promoted research, development and testing of the digital RMB, with more and broader test regions and test scenarios, and accumulated good experience. Generally speaking, the feedback from participating institutions and participating localities has been positive. For instance, the digital RMB red envelope during the Spring Festival was a good example. The digital RMB is getting closer to us, and we need to further enrich relevant scenarios and accumulate more experience. Next, we will further promote the digital RMB pilot programs and gather more experience. Thank you.

Bloomberg:

I have two questions and the first is regarding foreign outflows. As U.S. Treasury yields keep rising, is China worried about capital withdrawals of foreign and domestic investors from China's capital market? And do you have a response plan for this? Secondly, the Chinese government proposed reducing the government's leverage ratio. How does the monetary policy support this goal? Thank you.

Liu Guiping:

For these two questions, I will ask our two directors to answer separately. Regarding considerations about the impact of the reduction in the yields of treasury bonds on our entire market, Mr. Zou Lan, head of the Financial Market Department of the PBC, can you please answer it? Mr. Sun Guofeng from the Monetary Policy Department of the PBC can answer the latter question.

Zou Lan:

With regard to the bond market, we have been paying close attention to the operation of the bond market, including the situation of foreign investors investing in the Chinese bond market, as it continues to open up. Over the past few years, China's bond market has developed relatively quickly, with the balance reaching 118 trillion yuan at the end of February, ranking second in the world in terms of scale. China has a variety of bond varieties and also has complete trading tools, with expanding market depth and scale. Amid furthering opening up to the outside world, we have continuously improved the trading and settlement mechanisms of the bond market while drawing on rules of the international market. This has provided a more friendly and convenient investment environment for overseas investors.

Therefore, based on this situation, we feel that China's bond market still shows strong resilience and certain risk-aversive characteristics. From the data, we also observed that by the end of February, the scale of domestic bonds held by foreign institutions had reached 3.7 trillion yuan, a year-on-year increase of 62%. Overseas investors are mainly mid-to-long-term portfolio investors such as central banks and sovereign funds, so their holdings of Chinese bonds are relatively stable. In addition, the proportion of foreign investors' holdings in the bond market isn't high, and is now 3.1%, which is still relatively low compared with mature international markets.

We think that precisely because of these characteristics, FTSE Russell finally confirmed that China's bonds will be included in the FTSE World Government Bond Index (WGBI) a few days ago. Next, we will actively improve relevant policies and systems, and continue to promote the opening up of the bond market. That's my answer, thank you.

Sun Guofeng:

Let me answer the second question. When I introduced the framework of modern monetary policy, I talked about the 2020 Central Economic Work Conference, the Outline of the 14th Five-Year Plan (2021-2025) for Economic and Social Development and the Long-Range Objectives Through the Year 2035. It is clear that the intermediate goal of monetary policy is to ensure that the growth rate of money supply and the scale of social financing basically tally with the growth rate of the nominal economy. This is an anchor of the monetary policy framework. We should see that trend of the growth rate of money supply and the scale of social financing and the growth rate of debt are basically the same. Therefore, this anchoring method of the monetary policy framework actually embeds the mechanism of stabilizing the macro leverage ratio into the monetary policy framework, which is a manifestation of the cross-cycle policy design concept proposed by the fifth plenary session of the 19th CPC Central Committee, and conducive to achieving the long-term balance of stable growth and risk prevention. That is to say, if monetary policy achieves the intermediate goal and keeps the growth rate of the money supply and the scale of social financing basically matching the nominal economic growth rate, the macro leverage ratio can be basically maintained. Thank you.

Red Star News:

Chengdu and Chongqing are currently accelerating the construction of a financial center in western China. In the next step of regional financial reform, will the People's Bank of China make new arrangements for the Chengdu-Chongqing Twin City Economic Circle? Will there be regional financial policy support? At the same time, I have also paid attention to the recent exposures of consumer loan variants such as the "betrothal gift loan" and the "cemetery loan" by small and medium-sized banks. Will the central bank regulate the behavior of small and medium-sized banks and how will they be regulated? Thank you.

Liu Guiping:

In fact, you have also raised two questions. The first question is about the certain considerations on the construction of the Chengdu-Chongqing Twin City Economic Circle. I will invite Mr. Wang Xin to answer it. The latter one is also a recent hot topic, involving some views on the innovation of related credit products. I will ask Mr. Zou Lan to answer it.

Wang Xin:

Thank you for your question. The construction of the Chengdu-Chongqing Twin City Economic Circle is a major strategic deployment made by the CPC Central Committee with Comrade Xi Jinping at its core. It is a major regional development strategy. Deputy Governor Liu also just introduced a number of major regional development strategies, including the Guangdong-Hong Kong-Macao Greater Bay, the Yangtze River Delta, the Beijing-Tianjin-Hebei region, and the Xiong'an New Area. The Chengdu-Chongqing Twin City Economic Circle is another major regional development strategy, that is of great significance for further promoting the development of western China, and accelerating the economic and financial development of the western region. The People's Bank of China has done a lot of work in the building of the Chengdu-Chongqing Twin City Economic Circle. According to the deployment of the CPC Central Committee and the State Council, the central bank actively participated in the drafting and compilation of the outline for the construction of the twin-city economic circle in Chengdu-Chongqing region, and the in-depth research on financial-related issues. At the same time, we are now working with relevant departments, as well as those of Sichuan province and Chongqing municipality, to further study the major strategic deployment of financial support for the Chengdu-Chongqing Twin City Economic Circle and support for Chengdu and Chongqing to jointly build a western financial center. Chongqing and Chengdu have different development characteristics, and each has its own characteristics in terms of finance. Therefore, when we research and formulate financial support policies, we will give better play to their respective characteristics on the basis of commonality and integrated development. We will further explore innovative measures for financial reform and opening up, and better promote the development of the Chengdu-Chongqing Twin City Economic Circle. Thank you.

Zou Lan:

I will answer your second question. Loans for "engagement gifts" and "graveyard purchase" have caused a stir. We believe that some banks, under the banner of so-called financial innovation, are challenging social pain points, leading people to over-indebtedness, touching the bottom line of public order and good morals, and detracting from the intended function of finance serving the real economy. These loans are in essence consumer loans, which are advertised to gain customers through the creation of gimmicks. It also reflects the lack of service capabilities of some small and medium-sized banks and some difficulties faced by financial development. Therefore, we should pay attention to the issue, even though it is caused by the behaviors of individual banks. We consider the issue from three aspects.

First, we will continue to supervise financial institutions to optimize their credit structure, focus on micro, small and medium-sized enterprises, and adhere to the duty of serving the real economy. 

Second, the PBC will continue to work with the CBIRC and some other government departments to supervise and guide the financial innovation of small and medium-sized banks and business services access. Under controllable risk and prudent regulation, the PBC will support financial innovations by banks and rectify illegal acts that are against the public order and good morals as well as major guidelines and policies.

Third, the PBC will take multiple measures to improve the abilities of small and medium-sized banks to serve the real economy and ensure that those banks have the capability, willingness and know-how to offer financial loans. This is my answer.

Liu Guiping:

I'd like to also add a few words. I am very grateful to our friends from the media for their supervision and reporting on financial services and innovation. It helps us keep abreast of relevant information to innovate products and provide high quality services for the real economy as well as for urban and rural residents. Thank you.

China Daily:

We are also concerned about financial support for the development of the real economy. Under the background of fostering a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other, what policies will financial supervision departments introduce to support high-end manufacturing? What new measures will be taken to promote the upgrading of the overall manufacturing level? Thank you.

Liu Guiping:

I will pass the question to Zou Lan, head of the financial market department at the PBC, to explain this for the journalist.

Zou Lan:

Thank you for your question. As we know, the manufacturing industry is the main body of national economy. Improving the strength of the manufacturing industry will lay an important foundation for fostering a "dual circulation" development paradigm. In line with the decisions of the CPC Central Committee and the State Council, the PBC and other financial supervision departments have taken multiple measures to fuel growth in medium and long-term loans in recent years, and I have just briefly introduced some new data.

The requirement to raise the proportion of loans to the manufacturing sector is clearly stated in this year's government work report. Next, we will carry out this requirement in three aspects:

First, we will urge and guide financial institutions to optimize the credit structure of the manufacturing industry, to clarify the objectives and tasks of "increasing the proportion of loans to manufacturing industries" and "maintaining a reasonable growth rate of medium and long-term loans to high-tech manufacturing industries." We will guide financial institutions to increase credit supply to high-tech manufacturing and strategic emerging industries, while also supporting the equipment renewal and technological upgrading in traditional manufacturing industries.

Second, we will improve financial services for high-tech manufacturing. We will guide financial institutions to develop skills of industry analysis and risk assessment in line with the features of the high-tech manufacturing industry such as light-assets, high intelligence, high-risk and high returns. We will boost their capacity to increase product and service innovation such as investment and loan linkage, intellectual property pledge loans and supply chain finance. We will optimize internal management mechanisms and channel more credit resources into the high-tech manufacturing industry.

Third, we will support financial services for enterprises and industries aiming for breakthroughs in key and core technologies. We will provide financial services for enterprises undertaking major national scientific and technological innovation tasks, while upholding market-oriented and law-based principles. Thank you.

Liu Guiping:

There is actually a big issue in the former part of your question just now. I did not miss it, so I had invited the head of the Financial Market Department to respond to it first. Regarding the PBC's policies on the regional development strategy and possible future ones, I will quickly brief you.

On one hand, we have introduced special financial policies to support regional development together with relevant government departments in accordance with the overall strategic arrangement of the CPC Central Committee and the State Council. The policies involve the coordinated development of the Beijing-Tianjin-Hebei region, the construction of the Xiongan New Area, the integrated development of the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area, and the construction of Hainan Free Trade Port. On the other hand, we are working on policies to support the Chengdu-Chongqing Twin City Economic Circle in financial terms and their joint construction of a financial center in western China, together with relevant government departments. Related work is underway.

In short, the PBC will effectively perform its functions as the central bank in light of the country's established regional development strategy, and support and facilitate its implementation, both in accordance with the overall requirements of following a new development philosophy and fostering a new development paradigm to achieve high-quality development as China enters a new development stage. In particular, the PBC will effectively help foster a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other, to benefit the Chinese people and the world more. Thank you.

CNR:

China has achieved positive results in building a green financial system since the 18th CPC National Congress, and is highly expected to fulfil the goal of peak carbon emissions and eventually achieve carbon neutrality. How will you help achieve that goal by better playing the role of green finance? Thank you.

Liu Guiping:

Thank you for your question. The PBC has always attached great importance to developing green finance and putting into action General Secretary Xi Jinping's thinking on promoting ecological progress and the concept of "lucid waters and lush mountains are invaluable assets." I mentioned some of our explorations in developing green finance when making the overall introduction, especially the pilot zones for green finance reform and innovation in nine localities of six provinces and autonomous regions. Since you asked about it, I would like to generally brief what we have done and what we will do.

Our work so far has mainly focused on the three major functions of finance in supporting green and low-carbon development: resource allocation, risk management, and market pricing. We have formed five pillars of green finance so far: a standard system of green finance, requirements for the supervision and information disclosure of financial institutions, a system of policy incentives and restraints, a system of green finance products and market, and international cooperation in green finance.

As the next step, in line with the peak carbon emissions and carbon neutrality targets set by General Secretary Xi Jinping during his participation in a relevant international event in September last year, we are taking the following measures.

First, we are putting in place the work to achieve peak carbon emissions and carbon neutrality, and carrying out carbon accounting step by step. One of the core, fundamental and difficult tasks is to explore the establishment of a national carbon accounting system. We have already started this work.

Second, we are strengthening the restraint mechanism based on information disclosure. We already issued a notice to the pilot zones for green finance reform and innovation, encouraging financial institutions to disclose environmental information. We also motivated listed companies, financial institutions, bond issuers, and key emission organizations to share environmental information with each other.

Third, we are playing the role of the market. A very important function of green finance out of the three as mentioned just now is price discovery. To realize this function, it is necessary to build a unified national carbon emission trading market. The market should embody more financial attributes, while finance supports and coordinates with the market.

Fourthly, with energy restructuring as the core, we will create carbon emission reduction policy support tools that directly reach the real economy. Our relevant departments and bureaus have already started to explore and study this area, and we will release relevant information to the public after yielding outcomes.

In addition, the PBC has launched a green financial performance evaluation of financial institutions in order to better promote the development of green finance. We are improving this evaluation system in the hope of establishing a better mechanism to promote financial institutions to support green and low-carbon development in an effective, strong and orderly manner, and to promote the achievement of peak carbon emissions and carbon neutrality.

Fifth, we will do a better job of risk prevention and control. We have decided to gradually incorporate climate change-related risks into the macro-prudential policy framework.

Sixth, we are further deepening international collaboration. China once again became the co-chair of the G20 Sustainable Finance Study Group this year. We will play this role and take the lead together with the U.S. Treasury Department to motivate the G20 to do more in sustainable finance. We will strive to work out a common green finance taxonomy together with the EU within the year. We will strictly control investment in new coal power projects overseas by further implementing the Belt and Road green investment principles. As you may have noted, China has the world's largest green loan balance and the world's second largest green bond market, and the quality is good, with not a single case of default so far.

Seventh, we are furthering pushing forward the construction of pilot zones for green finance reform and innovation. Besides those already constructed in nine localities of six provinces and autonomous regions, we will construct pilot zones in more localities to help realize the goal of peak carbon emissions and achieving carbon neutrality.

There are still many things that need to be done and many issues that need to be explored and studied in green finance. We will further strengthen international collaboration embodied with Chinese characteristics, and further put into action Xi Jinping's thinking on promoting ecological progress and fully implement the concept of "lucid waters and lush mountains are invaluable assets." Thank you.

Chen Wenjun:

Thanks to all our speakers and friends from the media. Today's press conference ends here.

Translated and edited by Xu Xiaoxuan, Zhou Jing, Yan Xiaoqing, Li Huiru, Liu Jianing, Fan Junmei, Wang Mengru, Liu Qiang, He Shan, Zhang Rui, Wang Qian, Zhang Jiaqi, Wang Wei, Wang Yiming, Yang Xi, Lin Liyao, David Ball, Jay Birbeck, and Tom Arnstein. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.