SCIO briefing on supporting the high-quality development of the real economy
Beijing | 10 a.m. March 3, 2023

The State Council Information Office held a press conference Friday in Beijing about forging ahead with confidence, upholding fundamental principles and breaking new ground, and supporting the high-quality development of the real economy.


Yi Gang, governor of the People's Bank of China

Pan Gongsheng, deputy governor of the People's Bank of China and administrator of the State Administration of Foreign Exchange

Liu Guoqiang, deputy governor of the People's Bank of China


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

Read in Chinese


Mr. Yi Gang, governor of the People's Bank of China (PBC)

Mr. Pan Gongsheng, deputy governor of the PBC and head of the State Administration of Foreign Exchange (SAFE)

Mr. Liu Guoqiang, deputy governor of the PBC


Mr. Chen Wenjun, director general of the Press Bureau of the State Council Information Office (SCIO) and spokesperson of the SCIO


March 3, 2023

Chen Wenjun:

Ladies and gentlemen, good morning. Welcome to the press conference held by the State Council Information Office (SCIO). This is the ninth press conference in the series “Embarking on the New Journey — A Government Prospective.” We have invited Mr. Yi Gang, governor of the PBC, to brief you on forging ahead with confidence, upholding fundamental principles, breaking new ground and supporting the high-quality development of the real economy, and to take your questions. Also present at today's press conference are Mr. Pan Gongsheng, deputy governor of the PBC and head of the SAFE, and Mr. Liu Guoqiang, deputy governor of the PBC.

Now, let's give the floor to Mr. Yi for his introduction. 

Yi Gang:

Friends from the media, ladies and gentlemen, good morning. I am very glad to attend today's press conference. Over the years, you have paid much attention and given much support to the financing sector and the PBC's work. Here, on behalf of the PBC, I would like to express my sincere gratitude to all friends from the media and media outlets.

This year marks the first year in the implementation of the guiding principles of the 20th National Congress of the Communist Party of China (CPC). The PBC will follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, implement the decisions and arrangements of the CPC Central Committee, and provide strong financial support to achieve stable and sound economic growth. Now, I will brief you on the relevant ideas, policies and measures of our work. 

First, we will implement a prudent monetary policy in a targeted and effective manner to foster a favorable monetary and financial environment for high-quality economic development. The top priority is to stabilize the value of the renminbi (RMB). The stable value of the RMB has two implications, the first of which is stable prices. In recent years, we have persevered with a prudent and normal monetary policy, providing a solid foundation for stabilizing prices. As you know, the world experienced serious inflation last year. Many countries including the United States and some European countries registered inflation rates of 8%, 9% and even 10%, hitting a record high in the past four decades. China's consumer price index (CPI) rose by 2%, indicating an ideal inflation level. Over the past five years from 2018 to 2022, and even over the past 10 years from 2013 to 2022, China's inflation rate has averaged 2%. Over the past decade, China's CPI has reached as high as 2.9% and as low as 0.9%, with an average of 2%, which has not come easily. The second implication of stable value of the RMB is basically stable exchange rates. Over the past five years, the RMB breached the 7 per U.S. dollar level three times and fell back to below 7 per dollar. The RMB exchange rate has fluctuated in both directions with more flexibility. Compared with other currencies around the globe, the RMB is very stable and robust, and such flexible market-based exchange rate system has also helped regulate the macroeconomy and actively stabilized the international balance of payments. 

Next, we will comprehensively leverage multiple monetary policy tools, maintain reasonably ample liquidity, and see that increases in broad money supply (M2) and aggregate financing are generally in line with nominal economic growth. We will keep the RMB exchange rate generally stable at an appropriate, balanced level. 

Second, we will improve the ability, quality and efficiency of financial services for the real economy, and better support key areas and weak links. We have introduced moderate monetary policies. Some people call them structural monetary policies, but they are also moderate. Currently, the outstanding value of these structural monetary policies stands at 6.4 trillion yuan, accounting for around 15% of the PBC's balance sheets — a generally moderate proportion and level. The structural monetary policies support two key areas: one is micro- and small-sized enterprises and the private economy, and the other is green financing. In 2022, the outstanding balance of inclusive loans to micro- and small-sized businesses reached nearly 24 trillion yuan and more than 56 million micro- and small-sized businesses received inclusive loans. In terms of green financing, we have two supporting tools, which led to carbon emission reductions equivalent to 100 million metric tons of carbon dioxide last year.

In the next stage, we will intensify support for sci-tech innovation, manufacturing, green development and energy supply. Inclusive financial services will be further improved in fields such as micro- and small-sized businesses, rural revitalization and employment.

Third, we have strengthened the system to ensure financial stability, safeguarding the bottom line of preventing systemic risks. We all know that in recent years, China has made great efforts to ensure that financial risks have been contained. Currently, China's four major banks have become global systemically important banks and the top four banks in the world in terms of capital strength. Meanwhile, the operation of most banks in China, including share-holding banks and small and medium banks, is also stable. Important progress has been made in advancing reform and defusing risks for a few small and medium financial institutions with difficulties.

In the next step, we will move to ensure responsibilities for the prevention and disposal of financial risks are fulfilled by all parties concerned. The National People's Congress has completed the first review of the law on financial stability. We will push for enacting the law, placing all types of financial activities under regulation according to laws and protecting the interests of the overwhelming majority of people, small- and medium-sized investors and the insured. Moreover, we will strive to achieve the intended goals of rectifying the financial services of internet platform enterprises, stepping up regular oversight, and supporting platform enterprises' standardized and healthy development.

Fourth, we have deepened the reform of the financial system and orderly advanced higher-level opening-up in the financial sector. All have witnessed our achievements in this regard in recent years. In the next stage, we will continue to foster a market- and law-based, internationalized and world-class business environment. We will steadily promote institutional opening-up that covers rules, regulations, management and standards in the financial sector. We will also uphold multilateralism and actively participate in global financial cooperation and governance.

Next, my colleagues and I would like to answer your questions. Thank you.


Chen Wenjun:

Thank you, Mr. Yi. Now you are welcome to ask questions. Please identify the media outlet you represent before raising your questions.


My question is for Mr. Yi. Special plans and arrangements have been made in the report to the 20th CPC National Congress and at the Central Economic Work Conference to prevent and defuse major economic and financial risks. My question is, up to now, what progress has been made in preventing and defusing financial risks? What are the considerations for the work in the next stage? Thank you.

Yi Gang:

In recent years, under the strong leadership of the CPC Central Committee and the State Council, we have taken many effective measures to fend off and defuse financial risks, safeguarding the bottom line of preventing systemic risks. Financial risks have been contained overall. In dealing with financial risks, we have acted in accordance with market- and law-oriented policies to uphold the stable and sound operation of the financial market and infrastructure. We have ensured overall economic and social stability and effectively protected the interests of all our people. Also, we have adopted market- and law-oriented policies to guard against moral hazards and tighten market discipline. By doing so, he that does good shall find good; he that does evil shall find evil. All stakeholders can see the rules and thus have correct expectations. I would like to speak more about the following aspects: 

First, we have properly defused the risks of key institutions. We decisively took over Baoshang Bank, resolutely broke down rigid payments, and protected the interests of the general public in accordance with related laws. The bankruptcy of Baoshang Bank was the first case of its kind in China since reform and opening-up began. Meanwhile, we steadily defused risks for small and medium financial institutions, including Hengfeng Bank, the Bank of Jinzhou, and other city commercial banks in Liaoning province. Over the past three years, we supported local governments in issuing 550 billion yuan of special bonds to replenish the capital of small and medium banks. The number of high-risk small and medium financial institutions declined by half, from more than 600 to more than 300. There are no high-risk financial institutions in many provinces. Meanwhile, through targeted efforts, we have resolved the risks of high-risk financial groups, including Tomorrow Holdings Group and its units, Anbang Group and its units, China CEFC Energy Company Limited and its units, and HNA Group, avoiding the risk of their sudden collapse and preventing the spread of risks.

Second, we have made significant efforts to address acute problems in the financial sector. We have comprehensively implemented the new rules for asset management. The scale of high-risk shadow banking business, also called "quasi-credit," has shrunk by about 30 trillion yuan. We have promoted a campaign to address risks related to internet finance. Nearly 5,000 P2P online lending institutions have been closed. We have promoted the rectification of financial services of big internet platform enterprises in an orderly manner, placed all types of financial activities under regulation according to laws, regulated private equity, and stepped up efforts to reduce risks of both legal and illegal financial assets exchange. During the past five years, about 25,000 illegal fundraising cases have been investigated and dealt with.

Third, we have improved institutions and mechanisms for preventing and controlling financial risks. According to the decisions of the central government, we have advanced the establishment of financial risk disposal mechanisms led by major local leaders of the Party and the government. All provinces have set up financial risks disposal committees led by provincial leaders to see the responsibilities of financial institutions and their shareholders, supervisory departments, as well as local Party committees and governments. This creates a positive incentive for defusing financial risks. At present, all depository financial institutions nationwide have joined the deposit insurance scheme, which can provide full deposit guarantees for more than 99% of depositors. 

In general, China's financial performance is characterized by prudent, with financial risks shrinking and general risks under control. The banking industry account for more than 90% of China's financial sector, so it is prudent. China's foreign exchange reserves have ranked first in the world for many years. Last year, after continued efforts in the past decade and beyond, the PBC completed writing off the costs of financial reforms for state-owned commercial banks and rural credit cooperatives. This accomplishment further solidified the financial foundation of the modern central bank system and helped ensure currency stability in the financial sector. 

Moving forward, the PBC will collaborate with other financial management departments to enhance and modernize financial supervision, strengthen the system for ensuring financial stability, and tackle financial risks in major sectors. We will maintain high pressure on illegal financial activities and see the responsibilities of all parties to tackle risks fulfilled. In doing so, we can forestall systemic financial risks. Thank you. 


Tide News: 

As China continues to focus on economic growth in 2023, what monetary policies can we expect the PBC to implement in support of high-quality economic development? Thank you. 

Yi Gang:

This is a question everyone is concerned about. Monetary policies matter in support of high-quality economic development. The Central Economic Work Conference proposed the adoption of prudent monetary policies. Looking back on what we did over the past few years, we can gain a clear understanding of the key points in taking our future measures. There are several features in how momentary policies have supported high-quality economic development in recent years. 

First, our monetary policies have effectively supported the real economy in terms of economic aggregate, which is very important. The monetary policy, as part of macro policy, must adequately support the economic aggregate. Since 2018, we have reduced required reserve ratios 14 times and injected more than 11 trillion yuan to maintain long-term, reasonable, and ample liquidity. We maintained a reasonable increase in total credit, which played a crucial role in stabilizing employment and meeting basic living needs. We have created a favorable monetary and credit environment specifically for the maintenance of operations of micro and small-sized enterprises and market entities. The core of our policy lies in keeping price levels stable, which requires us to ensure that the M2 money supply and aggregate financing should generally increase in step with the nominal growth of GDP. This enables us to maintain a suitable aggregate monetary supply to keep price levels stable in China. 

Second, in terms of interest rate policies, mainly considering the domestic economy, we have kept a reasonable level of real interest rates to moderately lower financing costs. Let us review what we have achieved in the past several years. In 2018, when central banks worldwide raised interest rates, we kept a stable interest rate. In 2020, facing the impact of the COVID-19 pandemic, major central banks around the world lowered interest rates substantially. The PBC cut interest rates by 20 to 30 basis points while keeping them stable. Particularly in 2022, due to high inflation worldwide, major central banks significantly raised interest rates. In comparison, the PBC didn't raise interest rates but rather reduced them twice by 20 to 50 basic points. Meanwhile, loan prime rates by financial institutions were also reduced twice. Therefore, our financing costs last year were reduced, which greatly supported the real economy. Last year, the average interest rate of new loans for enterprises was 4.17%, 1.28 percentage points less than in 2018. The interest rate of inclusive loans to small and micro businesses was reduced from 6.3% in January 2018 to 4.9% in December 2022, both at historically low levels. We also supported micro and small-sized enterprises to lower their financing costs. 

Third, regarding the financial structure, we have shored up support for major sectors and weak links. We have upheld the principle proposed by the central government to work unswervingly both to consolidate and develop the public sector and to encourage, support, and guide the growth of the non-public sector. Our support has been extended to private enterprises and micro- and small-sized enterprises. In response to the difficult times caused by the COVID-19 pandemic, we have rolled out policies to assist micro and small-sized businesses by deferring principal and interest repayments on loans and providing collateral-free loans. These measures have been instrumental in ensuring the operation of market entities as well as employment. We have introduced a series of structural monetary policies that focused on the high-quality development of green finance, scientific and technological innovation, and infrastructure construction, as well as ensured the delivery of pre-sold housing projects. This year, we will further intensify efforts in these four aspects. 

Going forward, on the one hand, the total amount of money and credit should be moderate, and the pace should be stable to consolidate the results of the decline in real loan interest rates. On the other hand, the role of structural monetary policy should also be played moderately, and strong support should continue to be given to inclusive finance lending to micro and small businesses, green finance, scientific and technological innovation, and other areas.

The above is my brief answer to the focus of monetary policy to support high-quality development. Thank you.



In the case of continued interest rate hikes by the Federal Reserve, will the space for the Central Bank to continue to cut interest rates this year be further squeezed? In this situation, will we increase the use of structural monetary policy tools? Is the Central Bank concerned about the rise in inflation against the backdrop of the recent acceleration in domestic consumer demand recovery? Thank you.

Liu Guoqiang:

Thanks for asking. These are three questions, and I'll answer them individually.

First, on the issue related to the interest rate cuts, Mr. Yi said that last year our corporate loan interest rate was 4.17%, which was a record low. This year, the People's Bank will, in accordance with the decision and deployment of the CPC Central Committee and the State Council, continue to accurately and fully implement the prudent monetary policy, which is the general direction. But how to use specific policy tools, we will consider in an integrated manner, and choose accordingly. First, we will give prominence to the domestic target. Currently, the domestic economy is improving, but there are also some uncertainties. So for the next step, we will strengthen research, coordinate growth and prices, and adjust monetary policy tools in a timely and appropriate manner according to the changes in economic development and needs. Second, we will coordinate short-term and long-term, strengthen the cross-cyclical and counter-cyclical adjustments, adhere to normal monetary policy, maintain positive interest rates and an upward yield curve, and refrain from resorting to a deluge of strong stimulus policies. Third, we will keep in mind both domestic and international situations. We will focus on domestic development and reinforce sound regulation, and also pay close attention to international developments and better manage expectations, taking into account both the internal and external balance.

Second, structural monetary policy. Structural monetary policy has been leveraged more in the past few years. By the end of last year, there were a total of 15 structural monetary policy tools, with a balance of about 6.4 trillion yuan, which have effectively guided financial institutions to reasonably grant loans and promoted the tilting of financial resources to key areas and weak links. Structural monetary policy tools mainly play the leading role and work as a driving engine; that is, structural monetary policies drive financial institutions' subsequent loans, and these loans are actually those institutions' main way to support the development of the national economy. In the next step, we will continue to evaluate structural monetary policy tools and do a good job of classifying and managing them. For some key areas and weak links that need long-term support, structural monetary policy will give longer-term, continuous support, such as in the field of inclusive finance. Some tools with more pronounced phase characteristics should be withdrawn in a timely manner. Of course, we should emphasize a slow exit, making sure not to withdraw sharply. There are also a number of tools that can be considered to interconnect with other policy tools.

Third, regarding inflation, as Mr. Yi said earlier, China's CPI increased at 2% last year. Over the past five and even ten years, the CPI increased also at 2%. These achievements are not easy to come by. We attach great importance to the issue of prices, and we judge that the overall level of inflation in China in 2023 will remain moderate. In the short term, inflationary pressures are generally manageable because the economy is in the process of recovery and development, with inadequate effective demand still being the biggest challenge. The industrial and supply chain is running smoothly. Supply is relatively adequate, and the inflation expectations among citizens are relatively stable, so there are favorable conditions to help maintain the basic stability of prices. For the long term, there remain many unpredictable factors in the external environment, but demand is still gradually recovering. However, while the probability of inflation is not large, that does not mean that there is no chance of it increasing, so we must keep in mind the worst scenarios and remain vigilant against inflation.

In the next step, the PBC will remain committed to the general principle of pursuing progress while ensuring stability, and implement a prudent monetary policy with precision and vigor, so as to help keep major economic indicators within an appropriate range and ensure price levels are kept generally stable. Thank you.



The PBC and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued the 16-point set of financial measures at the end of last year in a bid to ensure the property market's stable and healthy development. Could you please share with us information regarding the implementation of these measures? Thank you. 

Pan Gongsheng:

Thank you for your question. Before answering it, I'd like to briefly discuss the background of the issue and relevant policies from a broader perspective. 

The CPC Central Committee has attached great importance to the healthy development of the property market. Since the 19th CPC National Congress, the CPC Central Committee has made clear its guidelines and policies for regulating the real estate sector, namely, adhering to the principle that housing is for living in and not for speculation, ensuring the long-term mechanism of keeping land costs, housing prices and market expectations stable, and implementing city-specific measures to facilitate positive circulation and sound development in the real estate sector. Under the leadership of the CPC Central Committee and the State Council, departments and lobal governments have ensured the implementation of the long-term mechanism of the real estate sector. This has helped curb the rapid expansion of the sector, sharp increases in housing prices, and real estate bubbles. 

Since the second half of 2021, some real estate enterprises, such as Evergrande, have been facing high risks with their balance sheets, because they have long been running business with a strategy characterized by “high leverage, high debt and high turnover.” As a result, they found it difficult to continue their business, which led them into crisis. Moreover, the average level of the medium- and long-term property market demand dropped, and the pandemic continued for three years and negatively impacted employment and income expectations. Given the multiple aforementioned factors, the spillover of the real estate sector's risks has increased.

Given the new situations in the real estate sector, the PBC, following the deployments of the CPC Central Committee and the State Council, released the 16-point set of financial policy measures at the end of last year to ensure the sound and stable development of the real estate sector. We have worked with departments concerned to step up efforts on both the supply and demand sides to promote the stable development of the sector. 

On the demand side, differentiated real estate credit policies have been implemented in places according to varied conditions, promoting declines in real lending rates and down payment ratios to provide more support for those buying their first homes or improving their housing situation. In December 2022, the average interest rate for newly issued individual housing loans was approximately 140 basis points lower than the level at the end of the previous year. The minimum down payment ratio allowed by local policies in most cities, apart from several hotspot cities, has reached the lowest national level. 

On the supply side, we have promoted the implementation of the 16-point set of measures to ensure the stable and healthy development of the real estate sector. We have implemented the program to improve the balance sheets of high-quality real estate enterprises, prevented financial institutions from getting overly risk-averse, and guide them to provide normal financing services. Real estate developers have been included in a program that supports private companies' bond financing. As such, financing in the real estate sector has been stable and in an orderly manner. We have rolled out 350 billion yuan of special lending set aside for presold projects' delivery, and set up a 200-billion-yuan loan support program for the same reason and a 100-billion-yuan loan support program for rental housing. We have made great efforts to guide financial institutions to promote mergers and acquisitions in the property sector, thereby accelerating the clearing up of risks by giving full play to the role of the market.

With the easing epidemic situation and the adjustment of the pandemic prevention and control measures, the policies put in place earlier have been able to bring greater positive influence and work more effectively. The recovery of market confidence has recently accelerated, and transactions in the real estate market have increased. Moreover, the financing environment of the real estate sector, especially high-quality real estate enterprises, has significantly improved. I'd like to share some figures. From September to December last year, real estate development loans increased by 230 billion yuan, 420 billion yuan more than in the same period in the previous year. In the fourth quarter, real estate companies issued 120 billion yuan of domestic bonds, up 22% year on year. In January this year, new loans for real estate development exceeded 370 billion yuan, an increase of 220 billion yuan year on year; 40 billion yuan of domestic real estate bonds were issued, up 23% year on year.

With China's ongoing urbanization, its residents and families have a great deal of demand potential for housing improvement. Moreover, the model of encouraging both housing rentals and purchases has great potential. Going forward, we will implement the deployments made by the 20th CPC National Congress and the Central Economic Work Conference, upholding the principle that housing is for living in and not for speculation. We will sum up experience and draw lessons from the development of the Chinese real estate sector and work with financial departments concerned to ensure the implementation of policies that have already been released. By doing so, we aim to support people in buying their first homes or improving their housing situation, help satisfy new urban residents' housing demand, and facilitate a housing market that prioritizes both housing rentals and purchases. We will improve the foundational system of real estate finance and the macro-prudential management system to promote the smooth transition of the real estate industry to a new development model. Thank you. 



I have two questions. First, from the perspective of weakening external demand, boosting domestic demand, and a widening service trade deficit this year, the current account surplus may provide less support for exchange rates. How does the central bank view the exchange rate situation this year and how will the central bank manage the RMB exchange rate? Second, China has shown a relatively good economic performance so far this year. Does the central bank still need to consider lowering the reserve requirement ratio or interest rates to stimulate economic growth?

Yi Gang:

As many have analyzed, the overall economic situation is improving regarding the exchange rate, but imports, exports and external demand are still relatively weak and face uncertainties. Just now, you asked how to view the exchange rate in this context. In the past few years, the mechanism through which the market sets the exchange rate has become increasingly more flexible , so it has acted well as an automatic stabilizer. In the past five years, the exchange rate has fluctuated at a ratio of about 4%, similar to that of major countries in the world. In the past, the fluctuation ratio of the RMB exchange rate had been minimal. However, in recent years, the ratio has gradually increased reasonably. In the past few years, the RMB exchange rate against the U.S. dollar has surpassed the "7" threshold three times, but it quickly fell back below the threshold. As you can see, the "7" threshold is not a psychological barrier. Though the exchange rate has surpassed the "7" threshold three times and fallen below, the overall economy has remained stable, and so have people's expectations. It is convenient for companies and people to enjoy foreign exchange services. The stability of economic and social expectations matters.

We have maintained a managed floating exchange rate regime based on market demand and supply, as well as a basket of currencies. It has worked very well and allowed businesses and the public to access foreign exchange services relatively freely to meet their reasonable foreign exchange needs concerning education, tourism, and imports and exports. Our view is that these policies should continue to be upheld in such a context. If you take a longer view, the stability of exchange rates is closely related to the well-being of the people. China's GDP last year was 121 trillion yuan, or about $18 trillion, with a per capita average of 86,000 yuan, or $12,700. Therefore, our comprehensive national strength and the well-being of our people are reflected not only through the RMB but also through the hard currency converted from the RMB. This is an important aspect of our modernization drive. Over the past 20 years, the RMB, despite fluctuating, has generally appreciated 20% against the U.S. dollar over the past 20 years, or 1% annually on average. At the same time, the real effective exchange rate of RMB calculated by the Bank for International Settlements has appreciated by about 40% over the past 20 years. A 40% appreciation over two decades is equivalent to an annual appreciation of 1% to 2%, which is a relatively appropriate level.

It is very important to maintain the stability of exchange rates because we have seen some cases in the world in which some countries are not able to avoid falling into the “middle-income trap” because of the sharp depreciation of exchange rates. So, on the one hand, we will keep exchange rates stable; on the other hand, our exchange rates must have flexibility . Just now, you asked about our considerations for this year and if we will continue implementing the mechanism. Overall, the RMB exchange rate will remain stable at a reasonable and balanced level. Some small fluctuations may appear driven by the market, but such fluctuations benefit the economy, China's imports and exports, and the people's expectations. In addition, more and more of our companies have learned to use hedging and forward settlement and foreign exchange tools to secure profits.

Your second question was whether we will cut the reserve requirement ratio or interest rates. We believe that the current level of some of the main variables of our monetary policy is relatively appropriate, as is the level of real interest rates. As for the reserve requirement ratio cut, we have cut it 14 times since 2018. These 14 cuts lowered the average statutory reserve requirement ratio from nearly 15% to less than 8%, a drop of over 7 percentage points. The less than 8% statutory reserve requirement ratio after the 14 cuts in the past five years is not as high as it used to be, but considering all things, cutting the reserve requirement ratio is still a relatively effective way to provide long-term liquidity and support the real economy so that overall liquidity remains at a reasonably ample level. I would like to invite Mr. Pan to share more about the exchange rate.

Pan Gongsheng:

Thank you. Mr. Yi has already given a very good and comprehensive answer. In recent years, China's ratio of current account surplus to GDP has stayed at about 2%, and the figure for last year was 2.3%, according to preliminary estimates. This year, there are many discussions about a potential slowdown of the global economy and trade and the potential gradual recovery of international flows as China's personnel flows adjust to anti-COVID policies and how this will affect trade in goods and services under the current account. We have done much research on it, and we believe that our current account has the basis and conditions to maintain a reasonable surplus.

The factors affecting the foreign exchange market and exchange rates are very diverse, such as economic growth, monetary policy, financial market, occasional risk event, and geopolitics. I would like to talk about our perspective of observing and analyzing the problem for your reference.

First, economic growth. With an easing epidemic situation, the optimized COVID-19 containment measures, and the effectiveness of earlier government policies to support businesses, domestic and foreign institutions predict that China's economic growth will be around 5% this year. On the other hand, it is also widely believed that major developed economies such as the United States may enter an economic recession, but there is a considerable divergence in opinions on how deep the recession could be. The growth gap between major economies such as China and the United States is expected to widen. China's economic growth will rebound to 5.2% in 2023, and US growth will slow to 1.4% in 2023, according to a report recently published by the International Monetary Fund (IMF).

Second, changes in the external financial environment. The market has different views on the peak interest rate of the Fed's current rate hike cycle and how long it will remain at a high level. However, there is a relatively high degree of consensus regarding the end of this round of interest rate hikes and the weakening momentum of the continued appreciation of the dollar. Therefore, the interest rate differential between China and the United States will remain stable or tend to diminish, the Fed's tight monetary policy will tend to ease this year, and the overall spillover effect will be marginally weakened.

Third, the investment value and attractiveness of Chinese yuan assets. As the Chinese economy is on course for a robust comeback and the country further advances its financial opening-up, the investment and risk-aversion attributes of yuan assets are highlighted. At present, the valuation of the domestic stock market is relatively low, and the interest rate differential between China and the United States is stable and narrowing, so yuan assets will show good investment value.

Fourth, if journalist friends observe and analyze carefully, you will feel that in recent years, the operation of China's foreign exchange market has shown a new feature. The operation of the foreign exchange market has shown relatively strong resilience, the main players in the market have become more mature, and the trading behavior has become more rational. In addition, the PBC and the SAFE, as regulators of the foreign exchange market, have also become more composed, calm, and experienced in the face of market changes.

Therefore, we are confident and capable of maintaining the stable operation of China's foreign exchange market and the basic stability of the RMB exchange rate at a reasonable and balanced level. Thank you.


China Securities Journal:

With the continuous opening-up of China's financial industry, we can see that the international status of the renminbi has greatly improved, and it has remained among the world's major currencies. My questions are, what are the achievements in promoting the internationalization of the renminbi? In 2023, what are the considerations of the PBC in promoting the internationalization of the renminbi? Thank you.

Pan Gongsheng:

Thank you for your questions. The process of renminbi internationalization has gone through more than a decade. With the growth of the Chinese economy and the increase in openness, renminbi's functions as an international currency in cross-border payments, investment and financing, reserves, and pricing, have been comprehensively enhanced. The international status of renminbi has also greatly improved, manifested in the following aspects:

First, renminbi accounts for about 50% of the country's total cross-border receipts and payments. In 2022, China's cross-border receipts and payments settled in renminbi totaled 42 trillion yuan, an increase of 3.4 times compared to 2017.

Second, renminbi's weighting in the IMF's Special Drawing Rights (SDR) ranks third currently. More than 80 countries and economies around the world have included renminbi in their reserve currencies, making it the fifth major reserve currency in the world.

Third, the use of renminbi in financial transactions continues to expand. China's bonds have been included in the three major international bond indices. By the end of last year, the balance of foreign entities holding renminbi assets in China was 9.6 trillion yuan, an increase of 1.2 times from 2017. The scale of stocks and bonds held by foreign entities was 3.2 trillion yuan and 3.5 trillion yuan, respectively. Overseas issuers have issued a cumulative total of 630 billion yuan in Panda bonds in China's bond market.

Fourth, the PBC has signed bilateral currency swap agreements with central banks or monetary authorities of 40 countries and regions, with a total amount of more than 4 trillion yuan. Last year, the PBC and the Hong Kong Monetary Authority upgraded the currency swap agreement to a long-standing one, increasing the swap size to 800 billion yuan. Moreover, we have expanded the arrangement of offshore renminbi clearing banks. Currently, 31 renminbi clearing banks have been authorized in 29 countries and regions, covering major international financial centers around the world.

The above is about the progress in RMB internationalization. We believe that we are currently facing a relatively favorable environment and opportunities in advancing RMB internationalization. First, over more than ten years of development, with the establishment of RMB clearing banks and local currency swap networks, the growth of the offshore RMB market, the opening-up of the domestic financial market, and the continuous improvement of the overseas layout of Chinese-invested financial institutions, we believe that the RMB has preliminarily shown the network effect of its international use. Second, as we deepen the reform of the RMB exchange rate formation mechanism, the RMB exchange rate has become more flexible, and enterprises are more willing to use the RMB in cross-border trade, investment and financing to avoid the risk of currency mismatch. Third, as China's economy gains growth momentum and its financial market further opens up, the investment and risk-hedging functions of RMB assets have been gradually enhanced. Fourth, the international monetary system is more diversified with the change in the global geopolitical and economic development environment. Therefore, we can conclude from these factors that RMB internationalization still faces a better environment and opportunities.

Next, we will earnestly implement the guiding principles of the 20th CPC National Congress, coordinate development and security based on the market-driven operations and independent choices of enterprises, and promote the internationalization of the RMB in an orderly manner. Our main work priorities are as follows: First, we will focus on trade and investment facilitation, improve the fundamental systems for RMB settlements in cross-border investment and financing transactions, improve cross-border RMB infrastructure, and expand the clearing bank network. Second, we will accelerate the institutional opening-up of the financial market, enhance the opening-up of China's foreign exchange and financial market and ensure better access to it, in a bid to build a more friendly and convenient investment and financing environment. Third, we will support and promote the healthy development of the offshore RMB market, improve the supply mechanism of RMB liquidity in the offshore market, and enrich RMB product systems in the offshore market to promote a virtuous cycle of the onshore and offshore RMB markets. Fourth, we will enhance the management, risk prevention and control capabilities of cross-border capital flow based on a broader opening-up environment. We will also establish and improve an integrated macro-prudential management framework for the cross-border capital flow of local and foreign currencies to guard against risks related to cross-border capital flow.

That's all about the current progress, situation and our next plan.

Yi Gang:

I fully agree with Mr. Pan's answer; please continue.


The Paper:

Data from the PBC shows that China's deposits hit a record high last year. How does the central bank view this data? Thanks.

Liu Guoqiang:

Thank you for your question. The significant increase in household deposits has been an eye-catching change in financial indicators since last year. In 2022, China's new household deposits increased by 17.84 trillion yuan, 7.94 trillion yuan more than the previous year. Since the beginning of this year, household deposits have maintained a fast-growing momentum. In January, household deposits rose by 6.2 trillion yuan, up 790 billion yuan year on year.

The rise in household deposits is mainly affected by consumers' spending and investment status and increased preference for liquidity. On the one hand, the COVID-19 epidemic has had a certain impact on consumption. As consumption decreases, savings will grow. A survey of depositors by the PBC showed that 61.8% of residents intended to save more money in the fourth quarter of 2022, up 10 percentage points year on year. About 22.8% of residents preferred to spend more, down 1.9 percentage points year on year. After the optimization of epidemic prevention and control policies, consumption has been significantly released, but it still needs time to recover. On the other hand, residents' lower appetite for risk and slower investment growth has led to a corresponding increase in deposits. In the fourth quarter of 2022, 15.5% of residents preferred to invest more, down 8 percentage points from a year earlier. By the end of January 2023, the asset management products of China's financial institutions totaled 95.9 trillion yuan, a figure directly summarized, down 2.4% year on year. Among them, household assets amounted to 40.9 trillion yuan, down 2.5% year on year. In addition, this year's Spring Festival fell in January. As enterprises paid wages and bonuses ahead of the Spring Festival, some of the deposits of enterprises were transferred to household savings, thus bringing an increase in household deposits.

As the macroeconomic performance improves, our residents' confidence in consumption and investment will increase, and their savings will gradually return to normal. The 20th CPC National Congress emphasized that we need to better leverage the fundamental role of consumption in stimulating economic growth. Clear requirements were put forth at the Central Economic Work Conference for prioritizing consumption recovery and expansion this year. After the optimization of epidemic prevention and control, the shortage in logistics and labor flow has been significantly improved, and consumption scenarios expansion has been sped up. Precautionary savings aggregated in the early stages are expected to be gradually released to meet actual consumption demand. A series of policies to promote consumption have been unveiled and implemented, and the policy effects will gradually become evident. In addition, as the economy improves, it will help enhance residents' confidence in investment, and residential investment will gradually return to normal levels.

Going forward, the PBC will act upon the spirit of the 20th CPC National Congress and the Central Economic Work Conference, accurately and strongly implement a prudent monetary policy, provide good financial services for residents to expand consumption and reasonable investment, and provide strong financial support for the development of the real economy. Thank you.


Cover News:

At the end of 2022, M2 money supply growth increased 11.8% year on year. In January this year, M2 achieved an increasing growth rate of 12.6% over the same period last year, the highest in six years. How do you view the rapid growth of M2? Thank you.

Liu Guoqiang:

Thank you for your question. At the end of January this year, the balance of M2 was 273.81 trillion yuan, a year-on-year increase of 12.6%, which was 0.8 and 2.8 percentage points higher than the end of December and the same period of last year, respectively, continuing its rapid growth since 2022.

The high growth rate of M2 is mainly due to the intensified measures of counter-cyclical adjustments in macro-regulation and the strengthening of financial support for the real economy by the financial system. Since 2022, due to the impact of unexpected domestic and foreign factors, China's economy has experienced acute downward pressure. In order to maintain macroeconomic performance, vigorous efforts have been made in counter-cyclical control policies, credit has maintained rapid growth, and derivative currencies have increased accordingly.

China has a financing structure dominated by indirect finance. Indirect finance is mainly based on credit loans, and direct finance mainly covers stocks and bonds. The assets of depository financial institutions in China account for more than 60% of the financial sector, which is much higher than that of developed countries in Europe and the United States. Indirect finance will lead to more derivatives of deposits, driving up the total amount of money. Since last year, M2 has been mainly generated through the expansion of assets in indirect financing. At the same time, due to fluctuations in the financial market, funds from wealth management and other asset management products have returned to the balance sheet, which has also led to the expansion of bank balance sheets, so the growth rate of M2 has been relatively high. If we combine the on-balance and off-balance sheets and look at social mobility in a comprehensive manner, the M2's growth rate is about 9.4%.

In addition, there are certain differences between China's M2 threshold and major countries. China's M2 threshold is relatively low, and there are no restrictions on the length and number of deposits, while other countries implement restrictions. For example, the U.S.'s M2 only includes fixed-time deposits of less than $100,000 and does not include fixed-time deposits greater than $100,000. In the European Central Bank ECB's M2, fixed deposits only include those of two years or less. The differences in these thresholds also makes the total size of China's M2 appear relatively large.

In general, while we are making counter-cyclical adjustments to maintain stable macroeconomic performance, our monetary policy remains prudent, and we will resolutely refrain from resorting to a deluge of strong stimulus policies.

In the next stage, the PBC will follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly study and put into practice the spirit of the 20th CPC National Congress and the Central Economic Work Conference, and continue to maintain a prudent monetary policy. While focusing on expanding domestic demand and vigorously supporting the real economy, we will refrain from resorting to a deluge of strong stimulus policies. Thank you.


Financial Times:

Since China put forward the "dual carbon" goals, green finance has ushered in a broad space for development. What role does the PBC play in supporting green development? What are the further considerations? Thank you.

Yi Gang:

As you all know, in 2020, General Secretary Xi Jinping made a major policy decision for peaking carbon dioxide emissions and achieving carbon neutrality and announced China would strive to peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. The key to achieving these goals is to reduce carbon emissions. We know that carbon emissions have a negative externality . That is, companies or units that emit carbon do not pay for the carbon they emit, so their carbon emissions have a negative impact on society. What we can do in finance is to reduce this negative externality and gradually reduce the green premium. How to do this? We need to strengthen information disclosure. This way, the public will know who is emitting carbon and how much is being emitted, helping them to gradually realize that whoever emits carbon will bear the cost of their carbon emissions. This will reduce the green premium and make our green and clean energy cheaper so that households and enterprises are more willing to use green products.

In 2021, the PBC introduced the carbon-reduction supporting tool, whereby it rolled out re-lending programs for financial institutions with an interest rate of 1.75%, allowing them to offer concessional loans in accordance with market principles for sectors involving clean energy, energy conservation and environmental protection, and carbon-reduction technologies. Financial institutions receiving low-interest re-lending loans from the PBC must abide by one condition: they must promise to release their carbon emission-related loan balance, interest rate, and effect. The release of this information should be subject to the oversight of independent third-party institutions and the public while also being conducive to the promotion of the green development philosophy. The goals of peaking carbon emissions and achieving carbon neutrality require the people and society to develop concepts about eco-friendly lifestyles, green manufacturing, energy conservation, and carbon emission reduction. To achieve this goal, we have made plenty of efforts to promote carbon accounting and the release of environmental information.

So far, re-lending loans worth over 300 billion yuan have been issued via the carbon-reduction supporting tool, and supported commercial banks in issuing loans worth more than 500 billion yuan. This has helped reduce carbon emissions by the equivalent of 100 million tons of CO2. Two foreign banks were also included in the scope of the tool last year.

We also strengthened international cooperation on green finance. As co-chair of the G20 Sustainable Finance Working Group, China took the initiative to formulate the G20 Transition Finance Framework . Approved last year at the G20 Summit in Bali, Indonesia, the framework has become a guidebook for all countries' financial sectors to support green and low-carbon development. Meanwhile, China and the European Union also jointly issued two editions of the ''Common Ground Taxonomy.'' According to the latest version of this classification, the convergency between Chinese and EU economic activities for climate change mitigation has reached 80%.

Looking ahead, we will improve the standard systems for green finance and strengthen financial institutions' capacity for releasing environmental information. We will also support the development of green finance tools, enhance international cooperation on green finance, and bolster the green transformation of the national economy in a bid to make our ways of production and life more eco-friendly.


Chen Wenjun:

The last question, please.

China News Service:

Due to the impact of multiple factors, global economic and financial governance faces new challenges and requires joint efforts from all countries to cope with the difficulties. In the past few years, what progress has China made regarding global financial cooperation? What are the next plans? Thank you.

Yi Gang:

In recent years, China has adhered to multilateralism and the win-win principle. It has proactively participated in global multilateral governance and played a positive role in pandemic responses, international financial cooperation, and green finance. I'd like to elaborate on global cooperation from the following aspects:

First, we have strengthened communication and coordination with all countries in terms of macroeconomic policies. As we know, the pandemic has dealt a heavy blow to the world's economy since its outbreak. This makes it very important for the world's central banks and finance ministries to communicate their financial and economic policies. We have worked to push global macro policies to jointly support economic recovery so that the world economy can overcome the impact of the pandemic and achieve sustainable growth.

Second, regarding global cooperation, China has proactively participated in the G20's Common Framework for Debt Treatments . In line with the principle of common actions and fair burden-sharing, China has worked to address the debt issues of heavily indebted poor countries and made positive progress.

Third, in the context of a safe and manageable development, we have expanded high-quality financial opening up in an independent and orderly manner. In recent years, in accordance with the arrangements of the CPC Central Committee and the State Council, financial authorities have rolled out over 40 measures to open up the financial sector for both domestic and overseas companies. This has greatly expanded market access to financial services. Since 2018, over 110 financial institutions have been established with foreign capital in China. Meanwhile, we have also worked to promote the opening up of the capital market in both directions. This was applauded by investors both at home and abroad. Just now, Mr. Pan also elaborated on the foreign investment in China's stock and bond market, which has seen significant growth over the years. Chinese bonds and stocks have also been added to multiple global flagship indices, making Chinese assets one of the options for asset allocation among global institutional investors. China's asset allocation also has relevant benchmarks, indices, and sound supporting infrastructure facilities.

There are many other aspects in terms of financial opening up and global financial cooperation. Looking ahead, the PBC will keep strengthening global cooperation in the financial sector, work to make the voice of China and other developing countries more heard in global governance, and see that Chinese ideas can make new constructive contributions to the entire global economic and financial order. Thank you.

Chen Wenjun:

Thanks to all the speakers and friends from the media. Today's press conference is hereby concluded. Goodbye.

Translated and edited by Xu Xiaoxuan, Li Xiao, Liu Jianing, Liu Caiyi, Gong Yingchun, Zhang Jiaqi, Wang Mengru, Zhang Tingting, Yan Bin, Zhu Bochen, Wang Qian, Yang Xi, Li Huiru, Huang Shan, Liu Sitong, Ma Yujia, Wang Wei, Zhou Jing, Yuan Fang, David Ball, Tom Arnsten, and Jay Birbeck. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.

/5    Chen Wenjun

/5    Yi Gang

/5    Pan Gongsheng

/5    Liu Guoqiang

/5    Group photo