China News Service, February 22. According to news from the People ’s Bank of China website, Liu Guoqiang, deputy governor of the People ’s Bank of China, said on the 22nd that, as one of the few countries in the major economies that implements normalized monetary policies, China ’s monetary policy space is still sufficient and its toolboxes are sufficient Reserves, have the confidence and ability to hedge the impact of the epidemic.

On the evening of February 19, the People's Bank of China released the "Report on the Implementation of China's Monetary Policy" in the fourth quarter of 2019, which attracted more media and public attention. The Vice President of the People's Bank of China Liu Guoqiang gave an exclusive interview on relevant issues after the report was released.

The following is the full text of the interview:

Reporter: We have noticed that the People's Bank of China released the "Report on the Implementation of China's Monetary Policy" in the fourth quarter of 2019. Can you tell us about it? What are the main ideas of China's monetary policy in the next stage?

Liu Guoqiang: Thank you for your interest in the monetary policy work of the People's Bank of China. The People's Bank of China releases the China Monetary Policy Implementation Report on a quarterly basis, which is an important channel for the People's Bank of China to publicize and interpret monetary policy, analyze economic and financial operations, and communicate and guide social expectations. On February 19th, we released the "Report on the Implementation of China's Monetary Policy" in the fourth quarter of 2019, reviewing and sorting out the main work of monetary policy in the past year, and looking forward to the main ideas and arrangements for the next stage.

In 2019, the People's Bank of China adheres to the fundamental requirements of financial services for the real economy and implements a sound monetary policy. Strengthen counter-cyclical adjustment, seek dynamic balance among multiple goals, maintain reasonable growth of monetary credit, promote continuous optimization of credit structure, and unblock monetary policy transmission through reforms, and do everything possible to reduce corporate financing costs. Overall, the prudent monetary policy has achieved remarkable results, reflecting forward-looking, precise, proactive and effective. At the end of 2019, the broad money M2 grew by 8.7% year-on-year, and the stock of social financing increased by 10.7% year-on-year. The growth rate of M2 and social financing scale was slightly higher than the nominal growth rate of GDP. In 2019, inclusive small and micro loans “increased in volume, expanded, and decreased in price”, and financing conditions for private enterprises and manufacturing industries have improved significantly. Corporate loan interest rates have fallen significantly, the RMB exchange rate has fluctuated in both directions, and flexibility has been further enhanced.

In the next stage, the People's Bank of China will scientifically and steadily grasp the counter-cyclical adjustment efforts, prudent monetary policy should be flexible and appropriate, properly respond to the short-term downward pressure on the economy, and take epidemic prevention and control as the most important task at present to increase the prevention and control of the new crown pneumonia epidemic. Monetary and credit support, strengthen counter-cyclical adjustments, actively play the role of structural monetary policy tools, increase support for small loans and rediscounts, guide the reduction of corporate financing costs, minimize the impact of the epidemic on the economy, and strengthen expected guidance To maintain the basic stability of the financial market, do a good job of the "six stability" and ensure that the economy operates in a reasonable range.

Reporter: The people of the country have recently been involved in the new crown pneumonia epidemic prevention and control fight. Can you tell us what the People's Bank of China has done to support currency epidemic prevention and control?

Liu Guoqiang: The People's Bank of China responded early and acted quickly in response to economic characteristics and market conditions in special periods, and issued a series of accurate and powerful countermeasures.

The first is to increase the operation of the open market reverse repurchase, guide the open market reverse repurchase, medium-term lending facilities, the bidding interest rate, and the loan market quoted interest rate (LPR) have each decreased by 10 basis points, driving the overall market interest rate downward. The initial market liquidity and the smooth operation of financial markets played a key role. At present, these short-term liquidity has been basically recovered, and the liquidity of the banking system remains reasonably abundant.

Second, a 300 billion yuan low-cost special re-loan was set up to provide funds to major national banks and corporate banks in 10 key provinces (cities), including Hubei, to accurately support enterprises directly participating in the fight against the epidemic.

These measures have effectively stabilized market sentiment and strongly supported winning the fight against epidemic prevention and control. As of February 20, the National Development and Reform Commission and the Ministry of Industry and Information Technology identified 876 national key enterprises, and 10 key provinces, cities, and provincial governments identified a total of 1082 local key enterprises. The People's Bank of China provided the list to the banks in a timely manner, and issued special re-issues to them in a timely manner. Loans, 727 key guarantee companies have obtained loans. After the financial discount, the actual financing cost of these enterprises was 1.30%, which was lower than the State Council's requirement of 1.60%. At present, the 7-day repo rate on the interbank market is running at about 2.2%, and the trend is stable. After the short-term fluctuations of the stock market and the foreign exchange market during the initial period after the opening of the market, they have basically resumed normal operations.

The policies and measures adopted by China in response to the epidemic have been fully affirmed by the financial market and all aspects of society, and have been highly evaluated by the International Monetary Fund, the World Bank and the international financial community. It is generally believed that the impact of the epidemic is temporary and limited. The Chinese economy will continue to show great resilience, and the Chinese government has sufficient policy space to stabilize economic growth.

Reporter: How to look at the currency and credit trends since the beginning of the year?

Liu Guoqiang: Generally speaking, the support of the prudent monetary policy for the real economy is solid. Since 2020, the People's Bank of China has scientifically and steadily grasped the countercyclical adjustment of monetary policy, guided the steady growth of the scale of monetary credit and social financing, and strengthened its ability to serve the real economy. Financial data for January was generally good. At the end of January, the growth rate of broad money M2 was 8.4%, and the stock of social financing increased by 10.7% year-on-year, continuing to maintain a steady growth trend, slightly higher than the nominal GDP growth rate, reflecting the counter-cyclical adjustment. The main features are:

First, loans maintained a good growth momentum in January. In the month, RMB loans increased by 3.34 trillion yuan. On the high base of the previous year, it still increased by 110.9 billion yuan year-on-year, and the growth rate at the end of the month was 12.1%. The People's Bank of China lowered its overall allowance by 0.5 percentage points in the beginning of the year, released more than 800 billion yuan of long-term liquidity, added mid-term loans to facilitate operations, put in mid-term liquidity, increased open market operations, and maintained reasonable liquidity. Promoting LPR reforms has unlocked the potential for banks to reduce interest rates on loans, promoted reductions in financing costs, and stimulated demand for loans. The working meeting of the People's Bank of China was convened as early as possible, and money and credit work was specially deployed to strengthen credit support to the real economy. Under the effect of the above-mentioned various measures, the enthusiasm of financial institutions for loans is relatively high. In January this year, due to the Spring Festival, five working days were less than the same period of last year, and still achieved a year-on-year increase in credit.

Second, the credit structure was further optimized. Corporate loans increased significantly, and loans for the month were mainly directed to corporate entities. In January, corporate loans increased by 2.86 trillion yuan, an increase of 299.8 billion yuan year-on-year, exceeding the increase of all loans by a year-on-year increase; corporate loans accounted for 85.6% of the total loan increase, an increase of 5.7 percentage points year-on-year. The large increase in corporate loans was mainly driven by the medium and long-term sector. In the month, the medium and long-term corporate loans increased by 1.66 trillion yuan, an increase of 257.2 billion yuan year-on-year, which is conducive to stabilizing investment and stabilizing the economy. The increase in bill financing was 359.6 billion yuan, a year-on-year increase of 156.4 billion yuan, which also reflects the increased support for credit to the real economy.

Third, the new crown epidemic also affected the loans to a certain extent at the beginning of the year. On the one hand, consumer loans decreased significantly during the epidemic period, and increased significantly in January from a year earlier. On the other hand, the change from January 31 to a holiday led to the delay of some of the loans due in February until the repayment in February, which made it more difficult for loan growth in February. The loan data of the previous two months should be combined and observed.

Some media have also asked why the year-on-year growth of M1 in January was zero. We also conducted a survey and analysis, and the results show that this is mainly affected by seasonal factors and also affected by the epidemic. The composition of M1 is mainly corporate demand deposits. First, before the Spring Festival, companies paying salaries and bonuses often lead to a periodical reduction of demand deposits. For example, in January 2019, M1 increased by 0.4% year-on-year, which is also a relatively low point. Second, in January, real estate sales in large and medium-sized cities fell sharply, real estate companies received less cash, and demand deposits also decreased. Thirdly, affected by the epidemic, the income from service industries such as catering, tourism, and box office during the Spring Festival fell sharply, and the return of household deposits to enterprises slowed down.

Reporter: How will the epidemic affect the Chinese economy? How does the People's Bank evaluate this?

Liu Guoqiang: The new crown pneumonia epidemic may have an impact on the Chinese economy, but its duration and scale are limited. The fundamentals of China's long-term good and high-quality growth have not changed. The impact of the epidemic on short-term economic growth is mainly reflected in the following: First, consumption has decreased significantly during the Spring Festival. The Spring Festival has always been the peak season for the tourism, retail and catering, film and other industries. Affected by the epidemic, these consumptions have all been greatly reduced during the Spring Festival this year. After the holiday, residents may reduce consumption to crowded places such as shopping malls and supermarkets for a long time. The second is that production may be affected by measures such as delayed resumption of work and restrictions on traffic. The extension of the Spring Festival holiday and the delay in resuming work have reduced the effective working days in the first quarter of this year. Resumption companies also face problems such as tight balance of epidemic prevention supplies such as masks and restricted traffic in some areas. At the same time, rigid expenditures such as wages, rents and interest of enterprises have also increased the pressure on cash flow. In particular, small and medium-sized enterprises with a small volume, a large proportion of fixed expenditure, and difficult capital turnover may be more affected.

The current downward pressure on the economy caused by the intensification of the new crown pneumonia epidemic is mainly short-term and will not change the fundamentals of China's long-term positive economy. Positive factors for economic operation are continuously accumulating. Epidemic prevention and control-related industries have grown strongly. The potential of new industries and new formats has been fully released. The market is abundant and the market sentiment has gradually stabilized. According to the data released recently, China's economy has a foundation for stable growth, and the market is expected to be stable. China's current account surplus in 2019 announced a few days ago accounted for only 1.2% of GDP, and its international balance of payments remained balanced. After the short-term fluctuations of the stock market and the foreign exchange market, the normal operation resumed. The Shanghai and Shenzhen Indexes have recovered their post-holiday declines. Recently, the exchange rate of the RMB against the US dollar has been fluctuating around 7 yuan in two directions, which is generally stable.

Reporter: What impact will the new crown pneumonia epidemic have on credit growth throughout the year?

Liu Guoqiang: The new crown pneumonia epidemic will cause some disturbance to credit growth in the short term. For example, affected by the epidemic, residents reduced spending on catering, entertainment, shopping and tourism, and consumer loans may decline temporarily. Affected by the delay in the resumption of work and production by enterprises, the demand for loans related to manufacturing, infrastructure investment and real estate investment will also be delayed. However, it should be noted that these effects are temporary. With the positive progress of epidemic prevention and control and the resumption of production and business, the impact on credit growth will gradually fade.

Throughout the year, the impact of the epidemic on credit growth was small. China has strong economic resilience, great potential, and large room for manoeuvre. The fundamentals of long-term macroeconomic improvement and high-quality growth have not changed, and credit demand is generally stable. The People's Bank of China will continue to maintain a prudent and appropriate monetary policy, scientifically and steadily grasp the counter-cyclical adjustment efforts, maintain reasonable and sufficient liquidity, play a guiding role in structural monetary policy, use reforms to promote the reduction of actual corporate financing costs, and guide financial institutions to increase Credit support for the real economy. On the whole, in 2020, credit is expected to maintain steady growth, and the growth of monetary credit and social financing will continue to be compatible with economic development.

Reporter: Consumer prices have risen since the second half of last year, and the epidemic may have new effects. How does the central bank view this? Should monetary policy strike a balance between “steady growth” and “inflation control”?

Liu Guoqiang: The "People's Bank of China Law" stipulates that the ultimate goal of China's monetary policy is to "maintain the stability of the currency value and thereby promote economic growth." The central bank must first keep the currency stable, keep prices stable internally, and keep the RMB exchange rate basically stable at a reasonable and balanced level to provide a suitable monetary and financial environment for economic development. Keeping prices stable is related to people's food, clothing, and housing. The People's Bank of China has always attached great importance to this in the formulation and implementation of policies.

In the whole year of 2019, China's CPI increased by 2.9% year-on-year, and the structural rise was obvious, mainly driven by the rapid rise in food prices such as pork. As various departments have successively introduced a number of measures to ensure stable prices and guide expectations, the CPI increase is generally controllable, and the inflation expectations have remained stable, preventing the divergence of inflation expectations. In January 2020, China's CPI rose by 5.4% year-on-year, an increase of 0.9 percentage points from the previous month. Among them, the increase in food prices was mainly affected by factors such as the misalignment of the Spring Festival date this year and last year, and the increase was generally in line with expectations; the increase in non-food prices was mainly due to temporary restrictions on production and supply due to the new crown pneumonia epidemic.

In the next stage, factors such as the new crown pneumonia epidemic may cause price disturbances, and the People's Bank of China will continue to closely monitor and analyze. However, from a fundamental point of view, China's economic operation is generally stable, total supply and demand are basically balanced, and there is no basis for long-term inflation or deflation. In 2020, the People's Bank of China will continue to implement a prudent monetary policy, remain flexible and moderate, and properly respond to the short-term downward pressure on the economy. At the same time, it will not engage in "flooding floods" and maintain the growth rate of broad money M2 and social financing and the name of GDP. The growth rate is basically matched, the price level is basically stable, and the credit contraction is prevented from overlapping with the economic downturn.

Reporter: Recently, some media said that China's debt rate will be further affected by the epidemic. How does monetary policy balance the relationship between stable growth and stable leverage?

Liu Guoqiang: The rapid growth of macro leverage has been curbed. In previous years, due to the rapid growth of off-balance-sheet financing such as trust loans and entrusted loans, the average annual macro-leverage ratio increased by more than ten percentage points from 2009 to 2017. In recent years, the People's Bank of China, together with relevant departments, has introduced new regulations on asset management, improved financial supervision, adhered to a prudent monetary policy, maintained macroeconomic leverage, and promoted the formation of a virtuous cycle between finance and the real economy. Since 2017, the growth of off-balance sheet financing has slowed down significantly. The overall leverage ratio has remained at about 250%. The structure has continued to optimize. The corporate leverage ratio has decreased by 5-6 percentage points compared with the end of 2017. slow.

Monetary policy intermediary goals have been changed to broad money M2 and the growth rate of social financing has basically matched the nominal growth rate of GDP, which has basically ensured a stable macro-leverage ratio. In January, the stock of social financing increased by 10.7% year-on-year, which was the same as the growth rate of the previous year. The growth rate of debt is roughly the same as the growth rate of social financing. This mechanism is not only conducive to supporting high-quality development with modest currency growth, but also to maintain macroeconomic leverage basically stable.

Affected by the short-term impact of the epidemic, domestic economic growth may be affected to a certain extent in the short term, and macro leverage may also fluctuate slightly, but these effects are temporary. The People's Bank of China will scientifically and steadily grasp the counter-cyclical adjustment efforts, adhere to a prudent and moderate monetary policy, and maintain the growth rate of the broad money M2 and social financing scale to basically match the nominal GDP growth rate. It will seek dynamic balance and balance among multiple goals. The relationship between stable growth and risk prevention will not see a significant increase in China's macro leverage, and will remain basically stable.

Reporter: How effective is the LPR reform? Will the decline in LPR affect personal mortgage rates? How to further reduce corporate financing costs in the current situation? Will you consider lowering the benchmark interest rate for deposits and loans?

Liu Guoqiang: In August 2019, according to the deployment of the State Council, the People's Bank of China reformed and improved the LPR formation mechanism, removed institutional and institutional obstacles in a reform manner, and drove the channel for monetary policy transmission. After the reform, the effect of LPR driving down the real interest rate of loans was obvious. The weighted average interest rate of newly issued corporate loans in December 2019 was 5.12%, a decrease of 0.2 percentage points from July before LPR reform, the lowest point since the second quarter of 2017, and the decline was significantly higher than the LPR decline over the same period, reflecting the strengthening of LPR reforms in financial institutions The role of independent pricing power, improving the competitiveness of the loan market, and promoting the decline in loan interest rates are playing a role.

The downward trend of LPR basically does not affect personal mortgage interest rates. Housing and housing speculation is still the dominant direction of the current real estate regulation and control policy. The monetary policy implementation report just released by the central bank also emphasizes that it is necessary to adhere to the positioning of houses for housing rather than speculation. Banks can determine personal housing loans through LPR plus points. Interest rates have basically remained at their original levels. In the process of reforming and improving the LPR formation mechanism, we must resolutely implement the positioning of "houses are used for living, not for speculation" and the long-term management mechanism of the real estate market, ensure the effective implementation of differentiated housing credit policies, and maintain personal housing loan interest rates. The level is basically stable.

With the increasing marketization of loan interest rates, the loan interest rates are mainly determined by the market. LPR is directional and instructive, and is conducive to reducing the real interest rate of loans and increasing financial support for the real economy. Moreover, in recent years, the profit growth rate of China's commercial banks has generally slowed down, but it is still relatively high, and there is room for appropriate profit concessions to the real economy. Banks appropriately reducing excessive requirements for short-term profit growth are conducive to smoothing the virtuous cycle of economy and finance. In the medium and long term, stimulating the vitality of micro-enterprises such as small and micro enterprises will help promote high-quality economic development, which is beneficial to both enterprises and banks, and will ultimately help the real economy to grow sustainably in the long run.

In the next step, the People's Bank of China will continue to maintain reasonable and abundant liquidity, advance LPR reforms and continue to release the potential of financial institutions to reduce loan interest rates, promote a noticeable decline in the actual interest rate of loans, and ensure significant progress in resolving the difficulty of financing small and micro enterprises. By further improving the LPR transmission mechanism, promoting the conversion of existing floating interest rate loan pricing benchmarks, promoting banks to actively and orderly use LPR pricing, changing traditional pricing thinking, resolutely breaking the implicit lower limit of loan interest rates, and unblocking monetary policy transmission. The benchmark deposit interest rate is the "ballast stone" of China's interest rate system and will be retained for a long time. In the future, the People's Bank of China will, in accordance with the State Council ’s deployment, take into account fundamental conditions such as economic growth and price levels, and make timely and appropriate adjustments.

Reporter: How does the epidemic affect the RMB exchange rate? How to view the recent trend of the RMB exchange rate?

Liu Guoqiang: China implements a managed floating exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies. The market plays a decisive role in the formation of exchange rates. In recent years, the renminbi exchange rate has been depreciating and rising, and the two-way floating has been driven by market forces.

Recently, the risk aversion in the international market has been affected by the epidemic, and the US dollar has continued to strengthen. Since this year, the US dollar has appreciated more than 3% against the euro and the Japanese yen; the US dollar index is approaching the 100 mark; Asian currencies such as the Korean won, Singapore dollar, and Thai baht have generally depreciated by more than 3%. Affected by this, the RMB exchange rate also experienced some fluctuations. Since this year, the exchange rate of RMB against the US dollar has depreciated by 0.7%, and the CFETS RMB exchange rate index has appreciated by 1.9%. In general, the RMB exchange rate has depreciated and increased around 7 yuan, floating in both directions, the foreign exchange market is operating smoothly, and the exchange rate is expected to be stable.

At present, the market generally believes that the impact of the epidemic on the economy is a short-term shock. After a short-term shock, the foreign exchange market can repair itself. In the long run, the trend of the exchange rate depends on economic fundamentals. The fundamentals of the long-term improvement of China's economy have not changed, foreign exchange reserves are sufficient, and the spread between domestic and foreign currencies is still in an appropriate range. These have provided fundamental support for the RMB exchange rate.

Reporter: In an effort to achieve the economic and social development goals, how should monetary policy deal with the impact of the new crown pneumonia epidemic in the next step?

Liu Guoqiang: As one of the few countries in the major economies that implements normalized monetary policies, China still has ample room for monetary policy, and its toolboxes have sufficient reserves. We have the confidence and ability to hedge the impact of the epidemic. In the next step, the People's Bank of China will continue to make overall plans for the "six stability", scientifically grasp the counter-cyclical adjustment efforts, prudent and appropriate monetary policy, be honest and innovative, and be brave to take responsibility, seek dynamic balance among multiple goals, and use reforms to unblock it. Monetary policy transmission, properly responding to the short-term downward pressure on the economy, while resolutely refraining from "flooding floods", minimizing the impact of the epidemic on the economy as much as possible, ensuring that the economy operates in a reasonable range, and working hard to complete the various tasks of economic and social development this year.

First, continue to make good use of the special refinancing policy. Support targeted key companies on the list to fight the epidemic, and give preference to small and medium-sized banks, improve the efficiency of loan review and lending, and ensure that the actual financing cost of the company falls below 1.6%.

The second is to play a supporting role in structural monetary policy tools. Supporting agriculture, supporting small refinancing and rediscounting tools is not a list system, but is inclusive. We will adopt market-oriented support methods for qualified enterprises, and design targeted resumption and resumption support based on different regions and industries. Program. The inclusive financial target reduction will also undergo annual dynamic adjustments in the near future. More qualified banks are expected to enjoy preferential policy support, which will further release the liquidity of the banking system.

The third is to further play a supporting role of policy banks. Development banks should increase special credit support for manufacturing enterprises and their resumption of production. The Export-Import Bank shall provide special support to import-export enterprises that have been greatly affected by Sino-US economic and trade frictions or affected by the epidemic. The Agricultural Development Bank shall specifically support the development of the entire industrial chain of live pigs, fill the financing gap in commercial finance, and meet the demand for live pig production funds during epidemic prevention and control.

The fourth is to maintain a reasonable and sufficient liquidity to guide the overall market interest rate downward. Comprehensive use of open market operations, medium-term borrowing facilities, standing loan facilities and other tools to keep the total amount reasonable. We will give play to the guiding role of policy interest rates reasonably, advance LPR reform to unlock potential, and promote cost reduction to show further results.

Fifth, according to the actual situation of epidemics in different regions, research on measures such as unified and automatic rollover of loans already issued. Do not report overdue records of corporate loans affected by the epidemic and fail to make timely repayments, and provide preferential policies in the classification of loan risks. Encourage financial institutions and enterprises to negotiate and reduce the new loan interest rates, and increase the financial impact on the enterprises affected by the epidemic. Support.