Financial security

PBC considers fine-tuning for growth and financial security among efforts to be prioritized in line with key findings of Xi’s report

The press center of the 20th CPC National Congress holds a press conference attended by central financial system officials on October 20, 2022. Photo: Li Hao/Global Times

China’s central bank pledged on Thursday to strengthen cross-cyclical and counter-cyclical adjustments to promote economic growth and stabilize employment and prices, among other financial efforts – focused on development, security and openness – to be prioritized in accordance to Xi Jinping’s report to the 20th National Congress of the Communist Party of China (CCP).

The financial to-do list should help navigate the economy through growing fears of a global recession and strengthen its role as a stabilizer of the global financial landscape, experts said, hoping for increased financial strength despite lingering global uncertainties .

China will uphold the principle of financial services serving the real economy and implement a prudent financial policy, said Pan Gongsheng, vice governor of the People’s Bank of China (PBC), the country’s central bank, at a meeting. a group interview organized Thursday evening by La Presse. Center of the 20th CPC National Congress.

Pan pledged to strengthen cross-cyclical and counter-cyclical adjustment to create a good monetary and financial environment and direct financial resources to better support key areas and weak links in economic and social development.

Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, said Pan’s focus on strengthening China’s cross cycles and counter cycles is a another illustration of its independent monetary policies.

China has pursued monetary policies in line with its own economic situation instead of blindly following the movements of other countries. For example, China did not follow in the footsteps of the United States in raising interest rates, as many other countries did, but instead lowered interest rate levels.

“Such measures show that the PBC’s monetary policy regulation is independent and flexible. It is a manifestation of the confidence and courage of Chinese financial regulators,” Dong told the Global Times on Thursday.

He also noted that China has many monetary tools in its toolbox to implement countercyclical regulation, including further interest rate cuts and increased credit issuance.

China is one of the few major economies in the world to have adhered to the implementation of a normalized monetary policy in recent years, Pan told reporters.

The stable monetary policy has created a good financial environment to stabilize growth, commodity prices, employment and the international balance of payments, he noted.

Looking back over the past decade, Pan said the country’s financial structure has been significantly optimized, which strongly supports major national strategies such as poverty reduction, small and micro enterprises, scientific innovation. and technology, green development, rural revitalization and transformation into a manufacturing powerhouse. , as well as key areas and weak links in national economic and social development.

Such efforts notably pit the country against the United States, which over the years has relied on quantitative easing to revive its pandemic-inflicted economy before flip-flopping on monetary policy with drastic rate hikes, market watchers said, blaming the U.S. for rattling the market. global financial markets.

Meanwhile, Pan’s focus on bolstering financial risk prevention is seen as showing regulators’ determination to safeguard financial security amid growing calls for national security.

The country will also adhere to coordinated development and security and firmly grasp the essentials to avoid systemic financial risks. Preventing and dissolving financial risks is the eternal theme of the financial industry, the central bank official said.

China’s financial system will place greater emphasis on financial risk prevention and control, as well as improve the mechanism of financial risk prevention, early warning and elimination to maintain stability and security. finances of the country, he continued.

One important method to achieve this is to keep the financial management system fence tight against potential risks, analysts said.

“I believe that China’s financial regulators will further improve financial regulations and laws, and financial institutions to improve their internal risk control mechanism to prevent cascading risks in case of financial mismanagement, such as bank failures,” according to Mr. Dong.

The expert also noted that safeguarding financial security indicates that regulators will ensure that national monetary policies are stable.

The deputy central bank governor also shed light on the CPC’s centralized and unified leadership on financial work, as he plans to translate the institutional advantages of Party leadership into more effective financial governance.

It is important to ensure that the Party continues to lead the development path of the financial industry, as the lucrative gains of the financial arena could carry huge moral hazards in terms of management, Dong noted.

“The Party leadership could guide the financial industry on a correct development path and maintain the stability of financial order. It could also ensure that finance serves the real economy,” he said. adding that Pan’s words could be read as a warning against unchecked capital. expansion.

Talking about a reliable push for high-level bilateral financial opening-up, Pan said the country has developed a multi-level financial market, improved the financial regulatory regime and anchored the market to be more focused on market and law-abiding.

China’s banking sector is now at the top of the global rankings in terms of total assets. Its stock, bond and insurance markets are all the second largest in the world, while its foreign exchange reserves have been the largest in the world for 17 consecutive years.

The country has taken the global lead in green finance, inclusive finance and digital finance. In addition, the yuan’s global influence has increased significantly, with its weighting in the IMF’s Special Drawing Rights now ranking third. More than 80 economies have included the yuan in their reserve currencies.