Financial News: Governor Yi, what is your comment on recent stock market decline?

Yi Gang: First of all, recent stock market volatility is mainly driven by investors’ expectations and sentiments. In fact, the fundamentals of the Chinese economy are sound. We have made progress in preventing and mitigating financial risks. The macro leverage ratio has been stable with strong endogenous potentials in the economy, and the driving force for sustaining stable economic growth has been strengthened. Overall, current stock market valuation has been at a relatively low level in history and in contrast to the country’s stable and positive economic fundamental.

Secondly, some local governments have recently rolled out policies to support the liquidity of local businesses, which we actively encourage. Meanwhile, the People’s Bank of China (PBC) has been exploring further targeted measures for easing business financing difficulties. First, we will advance the implementation of programs to support bond financing of private enterprises. By providing credit enhancement services for private enterprises with difficulties in bond issuing through credit risk mitigation, we will spur the overall recovery of financing for private enterprises. Second, we will promote the programs to support equity financing of private enterprises. By encouraging qualified private equity managers to set up private enterprise development funds, we will offer equity financing support to private enterprises with financial difficulties. Third, we will let macro prudential policies play an active role in structural adjustment through a combination of monetary policy instruments including central bank lending, rediscounting and medium-term lending facility (MLF) to support the commercial banks in expanding their loan issuance to private enterprises.

Thirdly, the PBC will continue to implement prudent and neutral monetary policy, prepare relevant policy tools in a forward-looking manner, maintain liquidity at an appropriate and stable level, promote healthy and stable market development, and foster a sound economic and financial environment.