Read in Chinese

Speakers:

Mr. Xuan Changneng, deputy governor of the People's Bank of China (PBC)

Mr. Li Bin, deputy director of the State Administration of Foreign Exchange (SAFE)

Mr. Zou Lan, spokesperson of the PBC and director general of the Monetary Policy Department of the PBC

Ms. Zhang Wenhong, deputy director general of the Statistics and Analysis Department of the PBC

Mr. Jia Ning, director general of the Balance of Payments Department at SAFE

Chairperson:

Ms. Shou Xiaoli, director general of the Press Bureau of the State Council Information Office (SCIO) and spokesperson of the SCIO

Date:

Jan. 14, 2025

Shou Xiaoli:

Ladies and gentlemen, good afternoon. Welcome to this press conference held by the State Council Information Office (SCIO), as part of the series "High-Quality Development Achievements of China's Economy." Today, we have invited Mr. Xuan Changneng, deputy governor of the People's Bank of China (PBC), and Mr. Li Bin, deputy director of the State Administration of Foreign Exchange (SAFE), to introduce the financial support for high-quality economic development and answer your questions. Also attending today's press conference are: Mr. Zou Lan, spokesperson of the PBC and director general of the Monetary Policy Department of the PBC; Ms. Zhang Wenhong, deputy director general of the Statistics and Analysis Department of the PBC; and Mr. Jia Ning, director general of the Balance of Payments Department at SAFE.

Now, I will give the floor to Mr. Xuan for his introduction.

Xuan Changneng:

Good afternoon. I am delighted to have this opportunity to meet you all today. Next, I will briefly introduce the situation regarding financial support for high-quality economic development, as well as the work plan going forward.

In 2024, the PBC maintained a supportive monetary policy stance, implementing four significant adjustments to monetary policy to sustain the upward recovery trend and support high-quality economic development. This is mainly reflected in four aspects:

In terms of the overall volume, we have maintained steady growth in monetary credit. By comprehensively utilizing a variety of monetary policy tools, we have ensured that liquidity remains reasonably abundant, promoting reasonable growth in the scale of social financing and monetary credit, and guiding a continuous decline in loan interest rates. Last year, we reduced the statutory deposit reserve ratio twice by a total of 1 percentage point and lowered the central bank's policy interest rates by a total of 0.3 percentage point, both representing the largest adjustments in recent years.

In terms of structure, we have intensified support for key areas. A total of 500 billion yuan has been allocated for technological innovation and technical transformation re-loans, effectively guiding financial institutions in increasing their financial support for first-time tech-oriented small- and medium-sized enterprises (SMEs), as well as for key projects in technological upgrade and equipment renewal projects. As of the end of last year, banks have matched 22,000 projects for marketing purposes, with signed loan contracts totaling 838.9 billion yuan ready for enterprises to draw upon at any time. Additionally, a 300 billion yuan re-lending program for government-subsidized housing was launched, the lower limit on mortgage interest rates has been removed, and efforts have been made to further reduce mortgage interest rates of existing houses, reducing borrowers' annual mortgage interest expenses by approximately 150 billion yuan. This dual approach supports the stable and healthy development of the real estate market. Two support tools for the capital market have also been created, effectively improving expectations in the capital market.

In terms of transmission, we streamlined the channels for the transmission of policy interest rates. The main policy rates have been clarified, gradually smoothing the transmission relationship from short to long-term interest rates. At the same time, we have strengthened the implementation of interest rate policies, addressed the idle flow of funds, vigorously rectified manual interest subsidies, optimized self-regulation of corporate deposits and interbank demand deposit interest rates, thereby reducing banks' interest expenses and creating conditions for reducing social financing costs and balancing sustainable bank development.

In terms of the exchange rate, the RMB exchange rate has remained basically stable at a reasonable and balanced level under complex circumstances. We have adhered to the market's decisive role in forming exchange rates, effectively utilizing the regulatory functions of the exchange rate on macroeconomics and the balance of payments. Meanwhile, through comprehensive measures, stabilizing expectations, public declarations of the central bank's stance and effective use of macro-prudential management tools, a series of robust measures have been adopted to prevent the risks of exchange rate overshooting.

Overall, the monetary policy in 2024 achieved favorable results. The total amount of finance grew reasonably. At the end of December, the social financing scale increased by 8.0% year on year, the broad money supply (M2) grew by 7.3% year on year, and RMB loans increased by 7.6% year on year, all higher than the nominal economic growth rate. Loan interest rates have been steadily declining. In December, the interest rate for newly issued corporate loans was approximately 3.43%, down 0.36 percentage point year on year, and the interest rate for personal housing loans was approximately 3.11%, down 0.88 percentage point year on year. The credit structure continued to improve, with medium- and long-term loans to the manufacturing industry increasing by 11.9% year on year, loans to specialized and sophisticated enterprises that produce new and unique products growing by 13.0% year on year, and inclusive loans to micro and small businesses rising by 14.6% year on year, continuing to outpace the overall loan growth rate for the same period. The RMB exchange rate remained basically stable at a reasonable and balanced level, with the exchange rate stabilizing at around 100 against a basket of currencies, taking into account both internal and external balance.

Following the central government's directive to implement more proactive and effective macroeconomic policies, the PBC will implement moderately loose monetary policies this year. In recent years, prudent monetary policy has increasingly emphasized requirements of being more forceful, effective, precise and flexible, with a tendency toward a more relaxed control range. It will also continuously strengthen counter-cyclical adjustments based on mid-year economic performance, and has consistently reduced reserve requirements and interest rates since the end of 2019, resulting in a relatively loose social financing environment.

In the next stage, macroeconomic policies will further strengthen counter-cyclical adjustments. We will appropriately adjust and optimize the intensity and timing based on domestic and international economic and financial conditions and financial market performance, to support the achievement of annual economic and social development goals. We will comprehensively use various monetary policy tools, such as interest rates and the reserve requirement ratio (RRR), to maintain ample liquidity and ensure a relaxed social financing environment. We will strengthen the implementation of interest rate policies, and further reduce overall social financing costs while maintaining healthy financial operations. We will effectively utilize structural monetary policy tools and leverage the dual functions of monetary policy tools in terms of both volume and structure. We will continue to take comprehensive measures to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

That's all for my introduction. Next, my colleagues and I will be happy to answer your questions. Thank you.

Shou Xiaoli:

Thank you, Mr. Xuan, for your introduction. Next, Mr. Li will also present an introduction.

Li Bin:

Friends from the media, good afternoon. Thank you for your long-term interest in and support for the work concerning foreign exchange management. Just now, Mr. Xuan provided a comprehensive and systematic introduction of the monetary policy and other financial support for high-quality economic development. Next, I will provide a supplementary introduction on the support for economic development of the foreign exchange sector.

Over the past year, SAFE has implemented the decisions and deployments of the Central Committee of the Communist Party of China (CPC), adhered to the approach of addressing external challenges through reform and opening up, and continued to advance high-level opening up in the foreign exchange sector and the reform to facilitate cross-border trade, investment and financing. We have canceled administrative licensing for the registration of foreign trade enterprises. Since the reform, banks can generally complete registration procedures within 15 minutes, with more than 100,000 enterprises having so far benefited from this policy. We have actively supported the development of new forms of trade, facilitating foreign exchange transactions for cross-border e-commerce totaling approximately $26 billion throughout the year. We have continued to promote the facilitation of cross-border financing, with policies benefiting 1.3 million innovative technology enterprises. We have further advanced the construction of the cross-border financial services platform, which has so far helped over 100,000 enterprises obtain financing totaling more than $380 billion, and facilitated foreign exchange payments of nearly $2 trillion for enterprises. We have optimized the fund management regulations for qualified foreign institutional investors (QFIIs) investing in domestic securities and futures, and supported domestic institutions in conducting cross-border securities investments in an orderly manner. We have further optimized the pilot policies for integrated foreign and domestic currency cash pooling for multinational companies, facilitating the collection and use of funds by multinational companies. Currently, more than 18,000 member enterprises of multinational companies have benefited from the cash-pooling service. At the same time, we have also focused on improving regulatory capabilities under open conditions, resolutely preventing and mitigating risks from external shocks, strictly cracking down on illegal foreign exchange activities, and maintaining the healthy development of the foreign exchange market.

Overall, the foreign exchange management work in 2024 achieved good results. Cross-border trade and investment was more active. In 2024, the total foreign-related receipts and payments of enterprises, individuals and other non-banking sectors amounted to $14.3 trillion, an increase of 14.6% compared to 2023, reaching a record high. The transaction volume in the domestic RMB foreign exchange market exceeded $41 trillion, an increase of 14.8% compared to 2023. The balance of international payments remained basically balanced. In the first three quarters of 2024, the current account surplus was $241.3 billion, with a ratio to China's GDP of 1.8%, which is within the internationally recognized equilibrium range. Preliminary estimates indicate that the current account will continue to maintain a reasonable surplus in the fourth quarter. China's outbound investment has grown rapidly. By the end of September 2024, foreign assets exceeded $10 trillion for the first time. Capital inflows from direct investment and securities investment in China have maintained a net inflow. The balance of foreign exchange reserves remained stable above $3.2 trillion, and the RMB exchange rate remained generally stable at a reasonable and balanced level.

In the coming period, the momentum of China's economic recovery and improvement will be further consolidated, the equilibrium in the balance of payments will not change, the resilience of the foreign exchange market will continue to strengthen, and the RMB exchange rate has the right conditions to remain generally stable. SAFE will thoroughly study and implement the guiding principles of the Central Economic Work Conference, better coordinate development and security, implement more proactive and effective foreign exchange management policies, and contribute to supporting high-quality economic development and high-level opening up. That's all for my introduction. Thank you.

Shou Xiaoli:

Thank you, Mr. Li. The floor is now open for questions. Please identify your news outlet before asking questions. Please raise your hand to ask a question.

Market News International:

With the recent downward trend in China's treasury bond yields, the widening interest rate gap between China and the United States and increasing pressure on depreciation of the RMB, will this restrict room for monetary policy easing and its intensity? And what measures will be taken to stabilize the exchange rate? Thank you.

Xuan Changneng:

Thank you for your questions, I will answer them. The PBC implements policies primarily considering the domestic economic and financial situation, while also taking into account both internal and external balance. In 2024, the international situation was complex and fast-changing, with multiple factors driving the U.S. dollar index to fluctuate and strengthen. China's foreign exchange market has shown remarkable resilience, with the RMB exchange rate generally exhibiting a two-way fluctuation trend, maintaining basic stability under the complex circumstances. Among major currencies, it has performed relatively well, creating favorable conditions for China to independently implement monetary policies and playing a positive role in stabilizing the economy and foreign trade. At the end of 2024, the CFETS yuan exchange rate composite index, which measures the yuan's strength relative to a basket of currencies, was 101.47, up 4.2% from the end of the previous year. The closing price of the RMB against the U.S. dollar was 7.2988, a depreciation of 2.8% from the end of the previous year. During the same period, the U.S. dollar index rose by 7%, fully reflecting the resilience of the RMB.

In the coming period, the complexity, severity and uncertainty of the external environment may further increase. However, China's economic foundation is solid, its current account remains in surplus, cross-border capital flows are independently balanced, foreign exchange reserves are ample, and the foreign exchange market is resilient, providing certainty and strong support for maintaining the basic stability of the RMB exchange rate.

First, the macroeconomic landscape is more solid. Since last year, and especially since September, a package of incremental measures have been introduced and will continue to take effect. The Central Economic Work Conference laid out plans to implement a more proactive fiscal policy and moderately loose monetary policy in 2025, which will further consolidate the recovery and positive momentum of China's economy. Second, the current account has maintained a surplus for several years. In the first 11 months of 2024, the trade surplus was $884.6 billion, an increase of 18.4% year on year, providing strong support for balancing foreign exchange supply and demand. Third, cross-border capital flows have been independently balanced. We have made steady progress in opening up the financial markets, improved the facilitation for cross-border investment and financing, and attracted stable inflows of medium- and long-term capital from abroad. Fourth, the overall foreign exchange reserves remained stable, effectively serving as an anchor for national economic and financial stability. Fifth, the foreign exchange market is more resilient. Market participants have become more mature, and their trading behavior is more rational. The awareness of exchange rate risk neutrality is being continuously enhanced, and more exchange rate hedging tools are being used. These provide a very important micro-foundation for the stable operation of the foreign exchange market and the balance of foreign exchange supply and demand. At present, the RMB payments and receipts accounted for 30% in cross-border trade in goods, and the proportion of enterprises' foreign exchange hedging has reached 27%. These represent very good micro-foundations for the foreign exchange market.

The PBC has a clear and consistent exchange rate policy. The goal of maintaining the basic stability of the RMB exchange rate will not change. Over the years, we have accumulated rich experience in coping with external shocks, and we have the confidence, conditions and ability to firmly achieve this goal. In the next phase, we will continue to take comprehensive measures to enhance the resilience of the foreign exchange market, stabilize market expectations and strengthen market management. We will also firmly rectify pro-cyclical actions in the market, take strong actions against disruptions to the market order, firmly prevent the risk of exchange rate overshooting, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

Thank you.

CCTV:

As mentioned earlier, the PBC introduced two new monetary policy tools last year to support the stable development of the capital market. I'd like to ask: How are these two monetary policy tools currently performing? What additional measures are planned for the future? Thank you.

Xuan Changneng:

I'd like to invite Mr. Zou to answer these questions.

Zou Lan:

Thank you for your questions. The capital market is both a "weather vane" of confidence and a vital channel for allocating financial resources, closely tied to economic development. Relevant departments have continually enhanced the functions of the capital market to give balanced weight to investment and financing, promoting its stable, healthy development through a series of policy measures. An important aspect of this is strengthening listed companies' responsibility for market value management while leveraging securities firms, funds and other institutional players as main stabilizing forces in the market. Current regulatory provisions do not allow companies to take out loans to purchase stocks. Related securities institutions are also facing funding shortages. In response, the PBC has created two tools to support the stable development of the capital market and enhance the financing and investment capabilities of relevant institutions, creating conditions and providing incentives for them to continuously implement new management requirements.

The two tools adhere to market-oriented and law-based principles. Listed companies and institutional players can independently decide the timing and scale of stock purchases based on market conditions, which helps leverage the market's selection functions and correct over-adjustments in the capital market. Since September last year, confidence in the capital market has significantly increased, with both trading volume and market indices rising substantially. This has given relevant companies and institutions more time to familiarize themselves with the new tools, make necessary preparations, and retain flexibility for using them when needed. By the end of 2024, the cumulative operations of securities, funds and insurance companies' swap facilities had exceeded 100 billion yuan. Financial institutions had signed stock repurchase and share increase reloan agreements with more than 700 listed companies or major shareholders, with a value exceeding 30 billion yuan. The market-wide disclosed ceiling for stock repurchase and share increase plans in 2024 had approached 300 billion yuan.

When the market value of stocks is significantly underestimated, listed companies, major shareholders and securities institutions, driven by their own interests, will have sufficient willingness to use the low-cost incremental funds provided by the two tools to repurchase or increase their holdings of stocks. This creates an inherent stabilizing mechanism that can effectively stabilize the market and curb its negative circulation. The PBC will further improve tool design and institutional arrangements based on practical experience to date, continuously enhancing the tools' accessibility. Relevant enterprises and institutions can obtain sufficient funds as needed to increase investment.

Thank you.

National Business Daily:

The Central Economic Work Conference emphasized maintaining a basic equilibrium in the balance of payments. How would you assess China's balance of payments situation in 2024? With external risks and challenges potentially increasing in 2025, what impact might this have on China's balance of payments? Thank you.

Li Bin:

On this balance of payments question, I'd like to invite Mr. Jia to respond.

Jia Ning:

Thank you for your interest in the balance of payments situation. The balance of payments provides a comprehensive record of all transactions between a country and other economies, including goods trade, service trade and investment income under the current account, as well as direct investment, securities investment, deposits and loans, and official reserves in the capital and financial accounts. This comprehensively reflects a country's external economic development and its internal-external balance. Two key criteria are generally used to assess a basic equilibrium in the balance of payments. First, the current account balance to GDP ratio should stay within ±4%, without prolonged periods of excessive surpluses or deficits. Second, the current account and non-reserve financial account should achieve autonomous balance, meaning current account surpluses are channeled into foreign investments, or current account deficits are supported by stable external financing.

Mr. Li just introduced the current state of our country's balance of payments. In 2024, China's current account surplus to GDP ratio was expected to be around 2%, remaining within a reasonable and balanced range since 2011. At the same time, the non-reserve financial account showed a deficit, mainly due to increased outbound investments by domestic entities, which reached $346.9 billion in the first three quarters of 2024, a year-on-year increase of 1.4 times. The total net inflow of direct investment capital and securities investment into China totaled $153.4 billion. In recent years, China's forex market has shown increased self-regulating ability. Goods trade surpluses and investment inflows have been converted into outbound investments by Chinese enterprises and banks. This is reflected in the balance of payments as a balance between the current account surplus and the non-reserve financial account deficit. The yuan exchange rate has remained basically stable at a reasonable and balanced level.

Looking at 2025, external uncertainties and instability remain, but China is implementing more proactive and effective macroeconomic policies. Solid economic fundamentals will help boost market expectations and confidence. China's foreign trade and investment show resilience, the forex market remains stable, and the balance of payments has the foundation and conditions to maintain a basic equilibrium. Let's look at the specifics.

First, China's manufacturing industry continues to transform and upgrade steadily. The increased resilience in foreign trade will help maintain a reasonable surplus in the current account. China's manufacturing industry generates 30% of global added value, playing an irreplaceable role in global production and supply. At the same time, the transformation and upgrading of the manufacturing industry and diversification of trading partners continue, enhancing export competitiveness and reducing dependence on a single market. Despite adverse factors such as the rise of global trade protectionism, China's exports have generally remained stable. In the first three quarters of 2024, China's exports accounted for 14.5% of the global total, maintaining a relatively high level in recent years.

Second, China continues to expand high-level opening up, further consolidating and enhancing the resilience of the forex market. Two-way cross-border investment is expected to remain stable and orderly. China is deepening reforms in its foreign investment promotion system, steadily enhancing the convenience of cross-border investment and financing, which benefits foreign investors doing business in China. The opening of the financial market also encourages foreign investment in yuan assets. China's forex market continues to mature, with the market-based yuan exchange rate mechanism steadily improving. Companies have strengthened their awareness and capability in managing exchange rate risks, while cross-border yuan use has increased. These factors have contributed to more rational and orderly market transactions. In 2024, corporate forex hedging ratios reached 27%, while the share of yuan transactions in goods trade approached 30%, both hitting historic highs.

In addition, we have consistently placed great importance on external risks and challenges. The SAFE will continue to deepen reform and opening up in the forex sector to better serve the development of foreign trade and investment. It will improve the long-term mechanism for corporate exchange rate risk management, better supporting companies' exchange rate risk hedging. At the same time, it will strengthen forex market management, taking macro-prudential counter-cyclical adjustment measures when appropriate and resolutely correcting pro-cyclical behavior in the forex market. This will help maintain the basic stability of the yuan exchange rate at a reasonable and balanced level, ensuring a basic equilibrium in the balance of payments. Thank you.

Bloomberg News:

I have several questions about the treasury bond market. In the central bank's view, do current treasury bond yields accurately and fairly reflect the fundamentals of the economy? What further measures will the central bank take to manage risks in the treasury bond market? Additionally, we've noticed that the central bank has recently suspended its treasury bond purchases. Could you explain why these purchases were halted and how long this suspension might last? Will the central bank increase the scale of its government bond trading this year?

Xuan Changneng:

Let's invite Mr. Zou to answer these questions.

Zou Lan:

Thank you for your questions. Recently, the rapid decline in long-term treasury bond yields has drawn widespread attention. After years of development, China's treasury bond yield curve has essentially established itself as a benchmark for pricing in financial markets. The level of treasury bond yields not only affects the government's financing costs but also has broader implications for the stable development of the entire financial market. Overall, long-term government bond yields reflect market expectations for future long-term economic growth, while also being influenced by market supply and demand dynamics. Since 2024, China's economy has been recovering and improving amid fluctuations. In particular, market expectations and social confidence have significantly improved since September. The economy is expected to achieve the annual growth target of around 5%. The recently held Central Economic Work Conference once again emphasized implementing more proactive and effective macroeconomic policies for maintaining stable economic growth. The improvement in economic expectations will ultimately be reflected in government bond yield levels.

Treasury bonds represent sovereign credit. If held to maturity, bondholders are guaranteed to receive both the principal and stated coupon interest, with no credit risk. Therefore, treasury bonds are typically considered safe assets. However, since long-term treasury bonds carry fixed coupon rates, changes in market interest rate expectations can lead to price fluctuations in the secondary market, which can sometimes be significant. Therefore, investing in government bonds is not without risk. For example, if you had bought a 30-year treasury bond at the end of 2023 and sold it now, the coupon interest income would have been less than 3%. However, the total investment return, including capital gains, would be close to 20%. The high returns have attracted continuous inflows of various types of capital into this market. These changing supply-demand dynamics have further driven up prices, with trading volumes of certain bond issues exceeding 10 times their previous levels. Conversely, at the end of 2022, long-term treasury bond yields rose by about 20 basis points within a few days, causing a sharp decline in secondary market prices. Some bank wealth management products that invested in treasury bonds fell below their net asset value, triggering concentrated redemptions. This further accelerated the price decline and resulted in significant losses for investors. The 2023 Silicon Valley Bank incident is another similar example. Let me take the 30-year government bond as an example. If long-term treasury bond yields do not accurately reflect economic fundamentals, or if there is a significant change in supply and demand, a 30-basis-point rise in yields would result in a price decline of more than 5% in the secondary market. When we factor in the amplifying effects of financial leverage used by some institutions and the downward spiral triggered by concentrated redemptions, greater losses could occur in the short term.

The PBC respects the market and the choices of all market participants who take risks and make independent decisions. The central bank also highly values the market information reflected in treasury bond yield changes. China's bond market is relatively young, having not experienced significant upheavals since the 1990s. As a result, many investors, managers and particularly the general public are not fully aware of the market price risks that underlie the high returns on government bonds. Therefore, the PBC has strengthened macro-prudential management, repeatedly warned of risks and enhanced market supervision. During periods of lower issuance activity in the primary market, the central bank suspended its secondary market purchases and instead used other tools to inject liquidity. This strategy aims to avoid affecting investors' allocation decisions while preventing supply-demand imbalances and market volatility, ultimately ensuring the market's long-term stability.

Thank you.

Cover News:

In early December 2024, the central bank announced revisions to the statistical scope of M1. What were the considerations behind this change? What impact will this have on financial data statistics and monetary policy regulation in 2025? Thank you.

Xuan Changneng:

Ms. Zhang will address this question.

Zhang Wenhong:

I'll answer these questions. Thank you for your questions, and thank you for your interest in our financial statistics work. The money supply represents the total sum of financial instruments that serve as means of circulation and payment at a given point in time. It is a crucial indicator for financial statistics and analysis. The PBC has always placed great importance on adjusting the statistical scope of money supply based on economic and financial developments and changes in the liquidity of financial instruments. Since its establishment, China's money supply statistical framework has undergone four major adjustments. In recent years, China's financial markets and financial innovation have developed rapidly, leading to significant changes in the liquidity of financial instruments. The scope of financial instruments meeting the M1 statistical definition has also evolved, necessitating dynamic optimization of M1's statistical framework.

The optimization of M1 calculations now includes household demand deposits and prepaid funds held by non-bank payment institutions. When M1 calculations were first established in China, personal bank cards did not exist, much less mobile payment systems. Since individual demand deposits could not be used for instant transfers and payments at that time, they were not included in M1 calculations. With the rapid advancement in payment technologies, household demand deposits now support instant transfers and payments. Individuals can make payments directly from these accounts without withdrawing cash. Since household demand deposits now have liquidity characteristics similar to corporate demand deposits, they should be included in M1. Customer funds held in non-bank payment institutions, such as WeChat Pay and Alipay balances, can be used directly for payments and transactions. Given their high liquidity characteristics, these funds should be included in M1. From an international perspective, M1 calculations in major economies typically include household demand deposits and other highly liquid payment instruments.

Financial statistics must provide an objective picture of financial operations. When defining the scope of statistical indicators, we must adhere to principles of scientific soundness and effectiveness to support policy decision-making. After recalculating historical data, we found that the revised M1 statistics show a stronger correlation with economic growth indicators and improved stability. The PBC will continue to maintain statistical transparency. Beginning in January 2025, we will implement the revised scope for M1 calculations, with the first release of this data expected in early February. Meanwhile, we will release revised M1 balances and growth rates dating back to January 2024. Thank you.

China Business News:

In recent years, interest rates have continued to decline and are currently at relatively low levels. The central bank has emphasized improving the transmission and implementation of interest rate policies and expanding policy space. What considerations are there for the next phase? Thank you.

Xuan Changneng:

I will answer this question. The interest rate system in China can be divided into three levels: The first level is the central bank's policy rate, which is currently the seven-day reverse repo rate for open market operations. When people talk about interest rate cuts, they're typically referring to a reduction in this rate. The second level consists of market benchmark rates. As Mr. Zou noted earlier, the treasury bond yield curve is a crucial component of these benchmark rates, serving as a key pricing reference for both the bond market and many other financial assets. The third level consists of market rates such as deposit and lending rates, which reflect the ultimate impact of lower financing costs. In recent years, the influence of policy rates as a guiding tool has become more apparent. Last year, the policy rate fell by 0.3 percentage point, guiding the one-year loan prime rate down by 0.35 percentage point and the five-year-plus loan prime rate down by 0.6 percentage point. This led to an even larger decline in lending rates. To achieve the goal of reducing overall social financing costs, we will take holistic approaches to expand the space for interest rate policies.

First, we will strengthen the execution of interest rate policies. Last year, the PBC cracked down on illegal "manual interest supplementation" practices used to attract high-rate deposits. It also improved self-regulation of interest rates for corporate and interbank demand deposits, maintaining market order and helping banks reduce overall social financing costs. This year, we will strengthen these efforts to further reduce banks' overall liability costs and ease pressure on net interest margins. This will help balance banks' balance sheet health with lower financing costs for the real economy.

Second, we will ensure a good balance between internal and external factors. The yuan exchange rate's stability is backed by solid fundamentals. As mentioned earlier, we will implement multiple measures to prevent exchange rate overshooting risks amid changes in the external environment. We aim to maintain the yuan's basic stability at reasonable and balanced levels, establishing a foundation for adjustments based on domestic economic and financial conditions.

Third, we will accelerate the replenishment of bank capital. The MOF recently clarified it will support major commercial banks' capital reinforcement through special treasury bond issuance. Local government special bonds also serve as a key channel for strengthening small and medium-sized banks' capital, demonstrating the coordination between fiscal and monetary policies. Everyone knows that capital is the foundation for banks to support economic growth, drive structural reforms and manage risks. When the government takes measures to supplement bank capital, it enhances banks' ability to operate prudently, effectively serve the real economy and resist risks. To some extent, this also helps offset the impact of lower financing costs in the real economy on banks' internal capital generation.

Thank you.

Economic Daily:

The 2025 National Foreign Exchange Administration Work Conference emphasized implementing more proactive and effective forex management policies. Mr. Li also addressed this in his opening remarks. What specific plans and measures are being considered for the next phase? Thank you.

Li Bin:

Thank you for the question. Let me address this. In 2025, the SAFE will better coordinate high-quality development with high-level security, building forex management systems that are "more convenient, more open and safer." While adhering to reform and opening up amid a complex environment, we will manage financial risks effectively, better support stable foreign trade and investment, and help sustain economic recovery. We will focus on the following four aspects.

First, we will introduce more forex facilitation measures. We will continue to promote policies facilitating trade foreign exchange receipts and payments for high-quality enterprises, focusing on expanding to regions and small and medium-sized banks that previously benefited less. This will help more high-quality small- and medium-sized enterprises enjoy the convenience of reduced paperwork and simplified procedures. Considering the characteristics of new trade formats such as e-commerce platforms and comprehensive foreign trade service enterprises, we will better support export proceeds collection, simplify forex payment procedures for logistics, warehousing and returns, and enhance the convenience of forex settlement. We will also respond actively to project contractors' needs, supporting their unified management and independent allocation of funds for cross-national and cross-regional projects, thereby improving fund management efficiency.

Second, we will promote forex management reform for foreign direct investment. At present, China's cross-border direct investment has achieved basic convertibility. We are studying the elimination of registration requirements for preliminary foreign direct investment expenses and domestic reinvestment. This will further enhance forex convenience for foreign direct investment funds and create a better environment for foreign enterprises operating in China.

Third, we will further promote opening up in the forex sector. We will optimize fund management for domestic enterprises seeking overseas listings and simplify forex registration for overseas IPOs. We will increase financing facilitation quotas for tech companies when appropriate, helping innovative enterprises reduce their financing costs. We will improve multinational companies' fund pool policies, facilitating fund allocation between domestic and overseas units, enhancing cross-border fund efficiency and reducing corporate financial costs. We will support the strategy of enhancing pilot free trade zones, facilitate forex management innovation in the Hainan Free Trade Port and the Guangdong-Hong Kong-Macao Greater Bay Area, and bolster the development of international financial centers in Shanghai and Hong Kong

Fourth, we will focus on strengthening regulatory capabilities and risk management while promoting opening up. On the one hand, we will improve the monitoring and early warning system for cross-border capital flows. Together with the PBC, we will strengthen counter-cyclical adjustments and expectations management in the forex market, firmly correct pro-cyclical behavior, decisively crack down on behaviors that disrupt market order, resolutely prevent exchange rate overshooting risks, maintain the RMB's basic stability at reasonable levels, and preserve balance-of-payments equilibrium. On the other hand, we will build a more refined and effective forex regulatory system, maintain strong enforcement against illegal foreign exchange activities, and preserve orderly forex market operations. Thank you.

Xinhua Finance:

The Central Financial Work Conference outlined five major work priorities regarding finance. What were the highlights of the PBC's work in this regard for 2024? What policy considerations are there for 2025? Thank you.

Xuan Changneng:

I would like to invite Mr. Zou to answer these questions.

Zou Lan:

Thank you for your questions. I'll answer these. Doing a good job in the five major areas of technology finance, green finance, inclusive finance, pension finance and digital finance is an important focus for the high-quality development of financial services for the real economy. Since the Central Financial Work Conference, the PBC, in conjunction with relevant departments, has formulated and issued guiding documents in various fields, refined work measures, accelerated policy transmission, and made positive progress.

Among the five major areas, technology finance ranks first. Mr. Xuan stated in his opening remarks that last year the PBC established a 500 billion yuan re-lending program for sci-tech innovation and technological transformation, continuously enhancing financial support for sci-tech innovation, advancing the development of pilot financial reform zones for scientific and technological innovation, optimizing the cross-border financing system and mechanism for tech enterprises, and building a diversified and relay-style sci-tech financial system. In terms of green finance, we have optimized carbon reduction support tools, and the pilot program in Shanghai expanded the scope of support to low-carbon transition, guiding more credit resources toward green and low-carbon development. In terms of inclusive finance, the interest rate for re-lending to support agriculture and small enterprises has been reduced from 2% to 1.75%, and the quota has been increased by 100 billion yuan. We have implemented five major special actions to increase financial support for all-around rural revitalization. Efforts have also been made in pension finance and digital finance, while systems and market development have been continuously strengthened.

At present, policy frameworks in various fields are basically sound, and structural monetary policy tools have achieved comprehensive coverage in the five areas, with continued effectiveness. Financial support has been improved. By the end of 2024, loans to enterprises that use specialized and sophisticated technologies to produce novel and unique products increased by 13% year on year, inclusive small and micro loans rose by 14.6% year on year, and agricultural-related loans grew by 9.8% year on year. By the end of the third quarter of 2024, green loans increased by 25.1% year on year. These loans grow significantly faster than all types of loans during the same period, indicating that the credit structure has been optimized further. The availability of financing has improved significantly. The number of micro-sized and small businesses receiving inclusive loans has exceeded 60 million, accounting for approximately one-third of business entities, while the loan approval rate for technology-based small- and medium-sized enterprises (SMEs) is close to 50%. Financing costs remain at a low level. In December 2024, the weighted average interest rate for newly issued corporate loans was around 3.43%.

Next, the PBC will further improve the top-level system design, formulate guidelines for the five major areas, refine policy measures by focusing on key areas and weak links, and comprehensively enhance the quality and efficiency of financial services for the real economy. First, we will strengthen positive incentives, leverage the guiding and driving role of structural monetary policy tools and macro credit policies, enhance coordination with fiscal policies, and guide financial institutions to increase credit resource input and optimize credit structures. Second, we will enhance the service capabilities of financial institutions, improve their internal incentive and restraint mechanisms, further diversify the range of financial products, and strengthen risk assessment capabilities and financial service technologies. Third, we will broaden financing channels, support enterprises in raising funds through bonds, equity and other market mechanisms, and increase the proportion of direct financing.

That's all from me. Thank you.

21st Century Business Herald:

What steps will the PBC take next to further enhance the international monetary functions of the RMB in areas such as cross-border payments, investment and financing?

Xuan Changneng:

Thank you. I'll take this question. In recent years, with the accelerated diversification of the international monetary system, the inherent demand among economic entities to use the RMB for trade settlement, investment and financing has been steadily increasing. Since the international financial crisis in particular, this demand has been continuously strengthening. The PBC has responded to market demand by swiftly implementing a series of measures to facilitate cross-border RMB usage, providing economic entities with more currency options for cross-border trade and investment settlements, thereby better supporting the real economy. These measures have several features: First, the policies are much better. In collaboration with SAFE, we continued to optimize fund management policies for domestic and foreign currency cash pools, overseas lending of domestic enterprises through commercial banks, and overseas listings of domestic enterprises, thereby enhancing the convenience of cross-border RMB usage. Second, the level of openness is higher. We have successively launched policy arrangements such as introducing the Cross-boundary Wealth Management Connect scheme in the Guangdong-Hong Kong-Macao Greater Bay Area and establishing multi-functional free trade account systems in Hainan and Hengqin. We have also improved policies for qualified foreign investors and actively promoted institutional opening-up. Third, the operation is more convenient. We continued to guide and promote commercial banks to optimize cross-border RMB business processes, improve transaction handling efficiency, and enhance service levels. Fourth, the network has been further improved. We continuously expanded the network of RMB clearing banks, increasing the number of participants and coverage areas of the RMB Cross-Border Interbank Payment System (CIPS), and providing fundamental support for cross-border use of RMB.

Overall, with the joint efforts of all parties, various indicators of RMB international use have steadily improved, and the capacity of cross-border RMB business to serve the real economy has continued to strengthen. In terms of payment functionality, the RMB has now become the world's fourth most actively used payment currency. Last year, the amount of cross-border RMB receipts and payments reached approximately 64 trillion yuan, a year-on-year increase of 23%. In terms of financing, the RMB has become one of the top three currencies for global trade financing. In 2024, foreign financial institutions and enterprises issued nearly 200 billion yuan in panda bonds in China, marking a year-on-year increase of 32%, while the issuance of offshore RMB bonds surged by 150% year on year. In terms of its reserve function, the RMB has been included in the foreign exchange reserves of over 80 foreign central banks or monetary authorities. In the offshore RMB market, the balance of RMB deposits in Hong Kong exceeds 1 trillion yuan, while the balance of RMB loans is close to 700 billion yuan, both reaching historic highs.

In the next stage, the PBC will continue to adhere to the principles of being market-driven and achieving mutual benefits, balancing development and security, and creating a more favorable environment for domestic and international entities to hold and use the RMB. First, we will strengthen coordination between domestic and foreign currencies, further improve policies for cross-border use of RMB, and enhance the convenience of handling cross-border RMB transactions. Second, we will support investment and liquidity management in RMB, increase risk-hedging tools, and support Shanghai's efforts to establish itself as a center for RMB financial asset allocation and risk management. Third, we will facilitate business entities in conducting cross-border financing activities in RMB, supporting RMB trade financing, overseas loans and RMB bond issuance. Fourth, we will improve the supply mechanism of offshore RMB liquidity, support the healthy development of the offshore RMB market, and enhance Hong Kong's status as both an international financial center and an offshore RMB business hub. Fifth, we will improve the infrastructure arrangements for the use of RMB in cross-border transactions, establish new RMB settlement banks in a reasonable manner, and continuously enhance the functions and services of the RMB cross-border payment system.

That's all from me. Thank you.

Shou Xiaoli:

Two reporters have their hands raised. We'll take the last two questions, please.

Phoenix TV:

The PBC has just released financial statistics for 2024. How should we view the aggregate financing and its structural characteristics in 2024? Thank you.

Zhang Wenhong:

Thank you for your question. I'll answer this one. At the end of 2024, China's aggregate financing stood at 408.34 trillion yuan, an increase of 8% year on year, with a growth rate 0.2 percentage point higher than the previous month. The aggregate financing increment in 2024 reached 32.26 trillion yuan, a historically high level. In terms of structure, the aggregate financing increment has the following main features:

First, financial institutions maintained a reasonable growth in loans to the real economy. In 2024, RMB loans issued by financial institutions to the real economy totaled 17.05 trillion yuan.

Second, the financial system continued to work in tandem with fiscal efforts, resulting in a significant year-on-year increase in financing through issuance of government bonds, reaching a record high. In 2024, net financing through issuance of government bonds reached 11.3 trillion yuan, marking the highest level on record for the same period, with an increase of 1.69 trillion yuan year on year. Specifically, net financing through treasury bonds stood at 4.5 trillion yuan, a year-on-year increase of 357.4 billion yuan; and net financing through local government bonds reached 6.79 trillion yuan, a year-on-year increase of 1.33 trillion yuan.

Third, financing through corporate bonds increased compared with the previous year. In 2024, net financing through corporate bonds amounted to 1.91 trillion yuan, a year-on-year increase of 283.9 billion yuan.

Fourth, trust loans, a form of off-balance-sheet financing, increased year on year. In 2024, trust loans increased by 397.6 billion yuan, a year-on-year increase of 240 billion yuan. In addition, entrusted loans and undiscounted bankers' acceptance bills decreased by 57.7 billion yuan and 329.5 billion yuan, respectively.

Overall, China's aggregate financing maintained reasonable growth in 2024, effectively supporting the recovery of the real economy. Thank you.

Shou Xiaoli:

The last question, please.

Securities Times:

The reform of foreign exchange business operations in banks has been rolled out for a year. Recently, regulations on due diligence and exemption from accountability in banks' foreign exchange business and reports on foreign exchange transaction risks have been released. What progress has been made in this regard so far? And what will the next steps be going forward? Thank you.

Li Bin:

Thank you for your interest in the foreign exchange business development of banks. In general, the banks' foreign exchange business development refers to activities such as customer identification, document review and risk monitoring that banks carry out while handling foreign exchange transactions for clients. To promote high-standard opening up and improve cross-border financial services, SAFE advanced the reform of banks' foreign exchange business operations in 2023. This initiative prioritized enterprise identification and strengthened post-event risk monitoring, changing the previous document-by-document review approach requirement in handling foreign exchange transactions. As a result, high-quality clients can be exempted from document review and banks can process foreign exchange transactions for them based on their instructions. This reform has both increased efficiency and prevented and controlled risk, bringing tangible convenience to businesses.

One year into the reform, banks have actively participated and people from all walks of life have given positive feedback. Currently, the number of participating banks has grown from the initial four to 16, with coverage gradually expanding nationwide. Based on market feedback and operational performance, the initial goal of reducing pressure on banks and alleviating burdens on enterprises has been achieved.

First, the reform has remarkably reduced the pressure on banks for in-process reviews. Banks no longer need to review each individual foreign exchange transaction for high-quality enterprises, greatly alleviating the burden of document review and shortening the average processing time by more than 50%. Thanks to the identification and classification of customer risk, banks can also innovate and customize various facilitation services for different clients, thereby meeting their needs in a more targeted manner.

Second, the reform has further expanded the scope of facilitation policies to cover more enterprises. At present, 18,000 high-quality clients, including small- and medium-sized enterprises, private enterprises and foreign-funded enterprises, have been included in the initiative. These businesses have conducted cross-border receipt and payment transactions exceeding $260 billion, further improving the turnover efficiency of business capital.

Third, the reform has effectively improved the quality and efficiency of risk prevention and control. Following the reform, banks can rely on more solid customer identification and classification measures, focusing more of their review efforts on high-risk customers and business. At the same time, the post-event monitoring system enables comprehensive and timely review of cross-border transactions, ensuring early identification, early warning and early handling of unusual activities.

The reform of foreign exchange business operations in banks is a fundamental and systematic task that we have been focusing on in recent years. Recently, we have introduced three supporting regulatory documents, including regulations on due diligence and exemption from accountability in banks' foreign exchange business and on foreign exchange transaction risk reports. Additionally, we have guided China Foreign Exchange Market Self-Regulatory Framework to issue three industry guidelines, further refining operational guidance for banks and promoting standardized and efficient implementation of the reform.

Moving forward, SAFE will adhere to the principle of pursuing progress while ensuring stability, steadily improving and expanding the development and reform of foreign exchange business operations in banks. First, we will organize the expansion in an orderly manner. We will guide banks that voluntarily participate in the reform to accelerate launching their programs as soon as conditions permit, and encourage those already implementing the reform to gradually extend it to more branches, in order to benefit more enterprises. Second, we will support banks in establishing and improving post-event monitoring systems, fully leveraging technological advancements to enhance their ability to detect risks early and ensure that no risks arise. Third, we will strengthen promotion, interpretation and training related to the newly issued supporting regulations, especially ensuring the smooth and effective implementation of the regulations on due diligence and exemption from accountability in banks' foreign exchange business. Thank you.

Shou Xiaoli:

Thank you, all the speakers and friends from the media. Today's briefing is hereby concluded. Goodbye.

Translated and edited by Liao Jiaxin, Yan Xiaoqing, Wang Xingguang, Liu Jianing, Liu Sitong, Zhang Rui, Xu Xiaoxuan, Wang Qian, Huang Shan, Yuan Fang, Mi Xingang, Wang Yiming, Zhang Junmian, Li Huiru, David Ball, and Jay Birbeck. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.