Central bank governor Zhou Xiaochuan attends a news conference on the sidelines of the annual session of the National People’s Congress in Beijing, March 9, 2018.
Yuan internationalization aids opening-up
Renminbi internationalization promotes China’s opening-up, said Zhou Xiaochuan, governor of the People’s Bank of China.
In terms of market access, China could take more bold actions to further open up, Zhou added.
He also predicted the trend of the opening-up of financial market will be further encouraged.
Leverage levels stabilizing, gradually falling
China’s leverage levels are stabilizing and gradually falling, said Zhou Xiaochuan, central bank governor.
He also said that the central bank will play a more important role in the country’s new regulatory framework.
“The trend of stabilizing and gradually falling leverages is entrenched,” he said when responding to question that China’s leverage levels are actually rising. The money supply growth, for example, has fallen even below nominal GDP growth, he said. “There are various debt financing indicators and one should not pick one indicator to come to the conclusion (of rising leverages),” he said.
He also said the country will study the twin peaks model of financial regulation in some countries, but not necessarily adopt it. “It (whether China will adopt the model) will mainly be based on China’s conditions.”
He said that under the new financial regulatory framework, China is already dealing with the already surfacing financial risks in financial and quasi-financial institutions to maintain health of the financial system.
M2 not the only money supply indicator
The broad measure of money supply, or M2, should not be the only indicator for understanding China’s liquidity conditions, said Zhou Xiaochuan.
By the end of 2017, China’s M2 growth was 8.2 percent, below the nominal year-on-year GDP growth of 8.5 percent, triggering concerns over inadequate liquidity to bolster normal economic growth.
“China’s M2 growth is slightly lower than nominal GDP growth, but we should monitor more indicators, such as prices and jobs, to see whether liquidity is tight,” he said.
There is no one simple indicator to judge the conditions of money supply, Zhou said. “It is a quite complex issue and multiple factors should be taken into consideration.”
China’s consumer price index grew by 1.6 percent year-on-year in 2017, well below the inflation target of 3 percent, and its unemployment rates, in terms of both registered and surveyed unemployment rate, were low, statistics of the National Bureau of Statistics show.
China to reduce reliance on capital support
China will rely less on wide capital support policies for economic growth as it seeks high-quality development, the country’s central bank governor said.
“We plan to use the money in a more efficient way as the money supply is sufficient enough,” Zhou said at the news conference, adding that it will not point to liquidity crunch.
Both monetary and foreign exchange policies will be adjusted accordingly, he said.
As for whether China will follow US Federal Reserve future steps to raise interest rates, Yi Gang, vice -governor of the central bank, said the PBOC mainly looks at the domestic economic and financial conditions and will make comprehensive consideration.
More access to financial market, but tougher oversight
China will push the opening up of its financial market but it does not necessarily mean loosening financial regulation, the central bank said.
“We have entered the new (development) stage and we can be bolder in opening up market access (to foreigners),” Zhou Xiaochuan said.
The internationalization of the yuan also help push the opening up of the financial market and China will steadily and gradually push forward the capital account convertibility, Zhou said.
Yi Gang, vice-governor of the PBOC, said that the opening up of financial market does not mean China will loosen regulation.
“We will continue to strengthen regulation and improve regulatory mechanism to effectively prevent and resolve financial risks and maintain financial stability,” Yi said.
Prudent monetary policy to guide housing market
China will maintain prudent monetary policy to promote the development of the housing market, as risks in the sector remain under control, a vice-governor of the central bank said on Friday.
“Reasonable increases in housing loans are necessary to meet the demand for housing purchases. The amount of repayments for housing loans has risen, but it is still within a reasonable range from a long-term perspective,” Pan Gongsheng, vice-governor of the People’s Bank of China, said at a press conference on the sidelines of the annual session of the National People’s Congress.
In 2017, housing loans increased by 4 trillion yuan ($630 billion), up by 22 percent year-on-year, compared to 12.7 percent year-on-year growth of total yuan loans issued during the same period, according to Pan.
He said the government will closely monitor some aggressive steps taken by some property companies and will strive to keep property markets stable.
Forex reserve to stay stable
China’s foreign exchange reserve will basically remain stable given the stabilizing economic growth prospect and the stable foreign exchange rate, the central bank said.
Zhou Xiaochuan said the country’s foreign exchange reserve has been affected by international asset prices but there have not been any major changes in China’s balance of international payments.
The country saw its foreign exchange reserve drop to the level of $3 trillion in January of last year and then it increased continuously over the past 12 months, according to Pan Gongsheng.
Pan said China’s economic fundamental and foreign exchange rate will stay relatively stable and the country’s foreign exchange reserve will also remain basically stable.
China to have ‘dynamic approach’ on fintech innovations
China will adopt a “dynamic approach” to oversee fintech innovations, the central bank governor said on Friday.
“The central bank has started early to conduct research on new technologies in the financial sector. Future supervisors’ attitude will be dynamic, which means regulations will depend on the maturity of technology,” Zhou Xiaochuan said at a press conference during the ongoing annual session of the 13th National People’s Congress.
“We do not prefer speculative products that make people rich overnight. That is not a good thing,” he said.
The central bank has banned initial coin offerings last year as part of effort to prevent risks and prevent illegal fund-raising, according to Zhou.
He said innovators should take cautious steps before introducing new products, and innovations should not go against with current stable financial order.