China Financial Stability Report: Maintain the prudence of monetary policy and effectively implement cross-cycle and counter-cyclical adjustments.

Zhitong App has learned that on December 22nd, the People's Bank of China released the "China Financial Stability Report". The report mentions that looking ahead, the Chinese economy has tremendous resilience and potential for development, and the long-term positive fundamentals have not changed. The financial system should adhere to the general principle of seeking progress while maintaining stability, fully implement the new development concept in a comprehensive, accurate, and thorough manner, accelerate the construction of a new development pattern, comprehensively deepen reform and opening up, increase the intensity of macroeconomic policy regulation, focus on expanding domestic demand, boosting confidence, and preventing risks, continuously promote the sustained improvement of economic performance, the continuous enhancement of endogenous growth momentum, the continuous improvement of social expectations, and the continuous resolution of hidden risks, and promote the qualitative and quantitative improvement of the economy. Efforts should be made to create a favorable monetary and financial environment, maintain the prudence of monetary policy, and pay more attention to cross-cycle and countercyclical adjustments.

Original text:

People's Bank of China Releases "China Financial Stability Report (2023)"

Recently, the People's Bank of China released the "China Financial Stability Report (2023)", which comprehensively assesses the stability of China's financial system in 2022. The report believes that in 2022, faced with complex and changing international environment and unexpected factors such as the pandemic, China efficiently coordinated epidemic prevention and control with economic and social development, increased macroeconomic regulation and control, stabilized the overall economy in the face of difficulties, basically achieved the main goals and tasks of the year in a complex and changing environment, and achieved stable economic operation, steady improvement in development quality, and overall social stability. The year-on-year growth rate of gross domestic product (GDP) was 3.0%, the overall employment situation was stable, the international balance of payments was maintained, the exchange rate of the renminbi remained basically stable at a reasonable and balanced level, and the overall operation of the financial system was stable.

The report points out that the financial system has earnestly implemented the decisions and arrangements of the Party Central Committee and the State Council, actively acted and made efforts in accordance with the requirements of "preventing the epidemic, stabilizing the economy, and ensuring safety", resolutely supported the stability of the overall economy, effectively controlled financial risks, continued to deepen financial reform and opening up, and effectively improved financial services. First, make every effort to support the stability of the macroeconomic situation. Maintain reasonable and sufficient liquidity, and implement two comprehensive reserve requirement ratio cuts totaling 0.5 percentage points in 2022. Give full play to the precise guidance role of structural monetary policy tools and increase support for key areas and weak links. Consolidate the achievements of the decline in actual loan interest rates. Second, steadily and orderly promote risk disposal. Continue to promote the disposal of high-risk small and medium-sized financial institutions. Promote the identification and disposal of non-performing assets, with financial institutions in the banking industry disposing of non-performing assets totaling 3.1 trillion yuan in 2022. Dispose of high-risk enterprise groups in an orderly manner, and the financial risk disposal of key groups such as the "Tomorrow Group" and HNA Group has entered the final stage. Third, continue to clean up and rectify the financial order. Consolidate the achievements of shadow banking risk governance, promote the transformation of asset management business, and orderly rectify individual case assets. Prudently dispose of risks in gold exchanges and "pseudo gold exchanges", rectify irregularities in third-party wealth management companies and cross-border internet securities firms, virtual currency trading speculation, and other illegal financial activities. Continue to do a good job in the disposal of stock P2P online lending risks. The rectification of deposit-taking business of third-party internet platforms has achieved positive results. Fourth, make every effort to maintain the stable operation of the real estate market. Do a good job in financial support for the delivery of completed buildings. Introduce 16 measures to support the stable and healthy development of the real estate market, guide financial institutions to support the reasonable financing needs of real estate enterprises, and establish a dynamic adjustment mechanism for the interest rate policy of new first-home loans. Promote the downward adjustment of personal housing loan interest rates to better meet the demand for both rigid and improved housing. The fifth is to effectively respond to external impact risks. The renminbi exchange rate remains basically stable at a reasonable and balanced level, cross-border capital flows and the supply and demand of the foreign exchange market are basically balanced, and the scale of foreign exchange reserves remains stable at over USD 3 trillion. The sixth is that the construction of the financial stability guarantee system has made positive progress. The "Draft of the Law of the People's Republic of China on Financial Stability" has been reviewed and publicly solicited opinions by the Standing Committee of the National People's Congress. The establishment of the financial stability guarantee fund has initially established the basic framework, and certain funds have been accumulated. Overall, the work of financial stability has achieved positive results in precise dismantling, reforming risks, preventing diseases at the front end, and supplementing short boards through institutional mechanisms. Financial risks have converged overall and are generally controllable. The financial system has withstood the test of a complex environment.

Looking ahead, the Chinese economy has tremendous resilience and potential for development, and the long-term positive fundamentals have not changed. The financial system should adhere to the general principle of seeking progress while maintaining stability, fully, accurately, and comprehensively implement the new development concept, accelerate the construction of a new development pattern, comprehensively deepen reform and opening up, increase the intensity of macroeconomic policy regulation, focus on expanding domestic demand, boosting confidence, and preventing risks, and continuously promote the sustained improvement of economic operation, the continuous enhancement of endogenous power, the continuous improvement of social expectations, and the continuous resolution of hidden risks, and promote the qualitative and effective improvement and reasonable growth of the economy. Efforts should be made to create a favorable monetary and financial environment, always maintain the prudence of monetary policy, and pay more attention to cross-cycle and countercyclical adjustments. Maintain the basic stability of the renminbi exchange rate at a reasonable and balanced level. Further optimize the institutional mechanisms for financial support to the real economy, meet the effective financing needs of the real economy, and improve financial services in weak areas. Strengthen financial regulation comprehensively, effectively improve the effectiveness of financial regulation, bring all financial activities under regulation in accordance with the law, comprehensively strengthen institutional regulation, behavioral regulation, functional regulation, penetration regulation, and continuous regulation, and crack down on illegal financial activities. Timely dispose of risks in small and medium-sized financial institutions. Improve the early correction mechanism for financial risks with hard constraints, and identify risks early, issue early warnings, expose early, and dispose of early. Establish a long-term mechanism to prevent and resolve local government debt risks. Establish a government debt management mechanism that is compatible with high-quality development, and optimize the structure of central and local government debt. Improve the macro-prudential management of real estate finance, treat different types of real estate enterprises equally in meeting their reasonable financing needs, adopt differentiated policies based on local conditions, and build a new model for real estate development. Adhere to the principles of marketization and rule of law, strengthen the responsibilities of financial institutions, shareholders, actual controllers, financial regulatory authorities, and local governments, and improve the major risk disposal mechanism led by local party and government leaders. Give full play to the risk disposal function of deposit insurance, steadily promote the fundraising and accumulation of the financial stability guarantee fund, promote the early implementation of the Financial Stability Law, and improve the long-term mechanism for maintaining financial stability. Strengthen regulatory coordination and coordination between industries, regions, and borders to firmly guard against the bottom line of systemic financial risks.

This article is selected from "The Official Website of the Central Bank", edited by Zhitong App: Xu Wenqiang.