On July 30, the People’s Bank of China (PBC) held the conference on work in H2 2021 to convey the overall judgment of the CPC Central Committee and the State Council on current economic conditions and major economic arrangements in H2, summarize the work of the PBC in H1 2021, and set priorities for H2 2021. Governor Yi Gang and Secretary of the CPC PBC Committee Guo Shuqing attended and addressed the conference. Also present were Chen Yulu, Pan Gongsheng, Fan Yifei, Liu Guiping, Liu Guoqiang, and Li Bo, who are members of the CPC PBC Committee and Deputy Governors; Xu Jiaai, member of the CPC PBC Committee and head of the Discipline Inspection and Supervision Group dispatched to the PBC by the Central Commission for Discipline Inspection and the National Commission of Supervision; and leading officials of the State Administration of Foreign Exchange (SAFE). Chen Yulu chaired the meeting and made concluding remarks.

It was noted at the conference that since the beginning of this year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, China’s economy has steadily strengthened and improved, and its performance has met expectations. Growth drivers have been boosted, and the main macroeconomic indicators are in a reasonable range. Facing complicated and challenging economic and financial situations, the PBC has earnestly implemented the decisions and arrangements made by the CPC Central Committee and the State Council. Following the overall planning and guidance of the Financial Stability and Development Committee (FSDC) under the State Council and adhering to the principles of integrity and innovation, it has performed its duties in a proactive, responsible and enterprising way. It has implemented a sound monetary policy and vigorously supported high-quality economic development. While effectively forestalling and defusing major financial risks, it has deepened financial reform and opening-up in key sectors and improved financial services and management. Also it has continuously consolidated the party-building work throughout the PBC. Overall, the PBC has delivered remarkable results in its work.

First, a sound monetary policy that is consistent, stable and sustainable has provided strong support for the steady recovery of China’s economy. Reasonable growths in money, credit and aggregate financing to the real economy (AFRE) have provided robust support for the real economy. A mix of monetary policy tools including open market operations, medium-term lending facilities (MLFs) and required reserve ratios (RRR) have been used to keep liquidity adequate at a reasonable level. The overall financing costs have remained generally stable with a slight decline, consolidating the effects of waiving profits in favor of enterprises. Financial services for private enterprises and micro and small businesses (MSBs) have been continuously improved. Policies and intensity of financial assistance have remained generally stable to coordinate with the rural revitalization strategy. The macro leverage ratio has been stable with a slight decline.

Second, the development of the green finance system has picked up the pace. Guided by the concept of developing green finance by improving “three major functions” and “five major pillars,” the PBC has accelerated its efforts to promote green finance development and has achieved progress. Specifically, it has studied on enriching the toolkit in support of carbon emission reductions, and released a new green-bond endorsed project catalogue. Carbon-neutral bonds have been launched in the interbank market, and an evaluation mechanism that is compatible with the incentives for realizing the goals of peaking carbon emissions and achieving carbon neutrality has been established. The green finance evaluation system for banking institutions has been improved.

Third, solid steps have been taken to forestall and defuse financial risks. Baoshang Bank has been declared bankrupt after going through judicial procedures. The asset and capital verification for nine financial institutions linked to Tomorrow Holding Co. Ltd. has been completed. Reforms of urban commercial banks in Liaoning have made progress. The default risk of some big private enterprises has been addressed in an orderly manner. The accountability measures of the FSDC for preventing and defusing major financial risks and the system for notifying major violations of laws and regulations such as “debt evasion” in the bond market have been implemented.

Fourth, macro-prudential management has made headway. Macro-prudential stress tests have been carried out steadily. The PBC has sought public comments on the Additional Regulatory Provisions on Systemically Important Banks (Trial), and drafted a list of systemically important banks (SIBs). It has also launched a system for managing the concentration of real estate loans.

Fifth, international coordination for macro policies has been strengthened, and the financial sector has opened up further. The PBC has been active in promoting international cooperation on green finance and participating in the global economy and climate governance, as well as in multilateral crisis prevention and response. It continued to implement the G20 Debt Service Suspension Initiative (DSSI), and properly addressed the debt problems of low-income countries. While ensuring that risks are effectively managed, the PBC has expanded the opening-up of the financial sector, participated in the implementation of the Regional Comprehensive Economic Partnership (RCEP), and reviewed the negative lists for financial services. 

Sixth, financial reforms in key sectors have been deepened. Proceeding with the RMB internationalization in a prudent way, the PBC has improved policies and deepened innovation for the cross-border RMB business. It has further accelerated the reform and opening-up in key areas of foreign exchange management and deepened the reforms of financial markets and financial institutions. It has released a white paper on the progress of research and development of the digital RMB while going forward with the pilot programs of the digital RMB research and development.

Seventh, the regulated development of financial businesses of Internet platform companies has been advanced, and illegal activities involving virtual currencies has been punished. The PBC has worked with relevant departments to resolutely implement the decisions and arrangements made by the CPC Central Committee and the State Council on strengthening anti-monopoly efforts and preventing the disorderly expansion of capital. By having regulatory talks with leading Internet platform companies, the PBC has urged them to follow the requirements regarding financial supervision, fair competition and protection of consumers’ legitimate rights and interests, as well as to carry out in-depth self-examination and rectification.

Eighth, new breakthroughs have been made in financial legislation, services and management. A series of major legislation projects have witnessed progresses, including seeking public comments on the Measures on the Administration of Credit Information Business and the Anti-Money Laundering Law (Revised Draft), and implementing the Implementation Measures of the People's Bank of China for Financial Consumer Protection. The business environment has been continuously improving, and the reforms of “separating permits and certificates from business licenses” have been carried out nationwide. The PBC has advanced the formulation of the financial development plan for the 14th Five-Year Plan period and has achieved positive results in the comprehensive application of the national financial database. It has also worked to properly reduce transaction fees levied on MSBs and self-employed individuals and rectified the practices of RMB cash rejections. Meanwhile, the PBC’s internal management and service efforts have brought new achievements.

It was requested at the conference that in H2 2021, the PBC system needs to follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, fully study and implement the important speech delivered by General Secretary Xi Jinping on July 1, and effectively align the minds and actions with the judgment, decisions and arrangements on the current macroeconomic situation made by the CPC Central Committee. Under the general principle of pursuing progress while ensuring stability, the PBC should maintain the stability of macro policies, avoid indiscriminate liquidity stimulus, and make sound monetary policy more forward-looking and effective to focus on supporting the real economy. The PBC should also strive to advance the reform and opening-up, enhance fair regulation, stand against monopoly and unfair competition, so as to promote the stable growth of foreign trade and investment, consolidate the momentum of stable growth, ensure the accomplishment of this year’s major development goals and tasks, and provide effective financial support for accelerating the building of a new development paradigm.

First, the PBC will keep stability as a top priority and ensure the sound monetary policy is flexible, targeted, reasonable and appropriate. The PBC will attach importance to cross-cycle policy design, properly handle the intensity and pace of policy implementation, and use a mix of monetary policy instruments to maintain a proper and adequate level of liquidity and expand loan growth at reasonable levels. The PBC will ensure the growth of M2 and AFRE is generally in line with nominal economic growth, and keep the macro leverage ratio generally stable. The market-oriented interest reform will be further carried out so that actual lending rates will be stable with a slight decrease. The PBC will deepen the reform of the RMB exchange rate formation mechanism, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level. It will guide financial institutions to strengthen support for key areas and weak links such as MSBs, agriculture, rural areas and farmers, and the manufacturing sector. The PBC will coordinate the integrated development of inclusive finance, green finance, sci-tech finance and supply chain finance, improve the policy system of financial support for scientific and technological innovation, and carry forward financial services for rural revitalization and financial assistance.

Second, the PBC will enhance coordination in quickening up the pace to improve the system of green finance. It will promote the implementation of tools to reduce carbon emissions and provide low-cost funds for eligible financial institutions to guide them to finance key areas with significant emission reduction effects at preferential rates. The PBC will also steadily promote information disclosure on carbon emissions and green finance evaluation. It will enhance climate risk management, carry out climate-related risk stress tests in an orderly manner, and enhance research on key issues related to green finance.

Third, the PBC will earnestly forestall and defuse major financial risks. It will closely monitor and examine risks in key areas, and implement mechanisms including notice of financial risks and accountability of major risks. It will work harder to ensure local Party committees and governments are held accountable for risk resolution within their jurisdictions so as to reduce the number of high-risk institutions in key provinces.

Fourth, the PBC will continue to strengthen macro-prudential management. It will improve the macro prudential policy framework, and release macro prudential policy guidance as appropriate. It will conduct macro-prudential stress tests phase by phase, and establish an annual evaluation mechanism of countercyclical capital buffer. The PBC will also properly implement the prudential management system for real estate finance and promote regulation on financial holding companies as well as systemically important financial institutions.

Fifth, the PBC will further promote financial opening-up in an orderly manner. It will continue to fulfill the commitment of advancing financial opening-up, and open up the financial sector at a higher level based on a negative list approach in line with international standards. The PBC will also coordinate nationwide opening-up, as well as the opening-up of pilot free trade zones and bilateral or regional opening-up based on free trade agreements. In addition, it will continue to promote international cooperation on green finance.

Sixth, the PBC will deepen financial reform in key areas. It will continue to press ahead with RMB internationalization in a stable and prudent manner, deepen international monetary cooperation, and develop offshore RMB markets. It will launch pilot programs for high-level opening-up of cross-border trade and investment, expand the pilot program for facilitating foreign exchange receipts and payments for trade, and encourage more places to participate in the pilot program, especially the central and western regions of China. The PBC will also promote reform on foreign debt registration and management, improve the administrative policy for bond issuance by overseas institutions in China, and prudently promote pilot research programs for the digital RMB.

Seventh, the PBC will urge and guide Internet platform companies to make comprehensive rectifications according to regulatory requirements, and maintain a tough stance on cryptocurrency trading and speculation. It will apply equal standards to the same business activities and the same institutional types, in order to ensure problems are rectified in a timely and high-quality manner, to maintain business continuity and normal business operation, and to maintain the quality of financial services for the public. Sticking to the market-oriented, law-based, and international principles and the “two unwavering commitments”, the PBC will protect property rights and intellectual property rights and create a level playing field for the market.

Eighth, the PBC will continue to ensure good financial services and management. It will promote key legislations in the financial sector, and deepen the reform of delegating power, streamlining administration and improving regulation and services. The PBC will also work on the task of comprehensive financial statistics, and proactively promote policy implementation of reducing payment service fees. The PBC will continue to conduct demonstrative projects of rural revitalization empowered by Fintech, as well as pilot programs on the comprehensive application of financial data. Meanwhile, it will implement the tasks of providing financial services for the Beijing 2022 Olympic Winter Games. The PBC will also clamp down on cash rejection, accelerate improvements in State Treasury management, and make great efforts regarding informatization. Furthermore, the PBC will introduce the Measures on the Administration of Credit Information Business to enhance protection of personal data and individuals concerned. It will improve the coordination mechanism for anti-money laundering work, and fight against activities that infringe on the legitimate rights of financial consumers.