The Monetary Policy Committee of the People’s Bank of China (PBC) held the fourth quarterly meeting in 2020 (its 91st meeting) on December 25 in Beijing.
The meeting discussed the economic and financial developments both at home and abroad. It was agreed that remarkable results have been achieved in coordinating pandemic containment and economic and social development since the beginning of this year, and the Chinese economy has gradually returned to normal. The sound monetary policy has proven to be forward-looking, precise and timely. Vigorous support has been rendered to pandemic containment, the resumption of work and production, and the development of the real economy. With financial risks under effective control, the financial sector has gradually improved its quality and efficiency of serving the real economy. The transition of the pricing benchmark for outstanding floating-rate loans has been completed, and the loan prime rate (LPR) reform has been delivering benefits, with monetary policy transmission becoming more efficient and loan rates significantly lowered. Remaining generally stable, the RMB exchange rate has become more flexible in two-way fluctuations and played its role in stabilizing the macro economy.
It was pointed out at the meeting that the spread of COVID-19 outside China and the world’s economic landscape are still complicated and challenging for the time being. The domestic economy has seen stronger endogenous growth drivers but still faces instabilities and uncertainties such as the pandemic. The PBC will enhance judgment and analysis of the economic situations, strengthen coordination of international macroeconomic policies, concentrate on running its own affairs well, and make fine cross-cycle policy designs, so as to bolster high-quality economic development. The sound monetary policy will be flexible, precise, adaptive and appropriate. The PBC will keep its monetary policy consistent, stable and sustainable by properly managing the timeliness, intensity and effectiveness of the policy, so as to maintain necessary support for economic recovery. A mix of monetary policy tools will be used and innovated to keep liquidity adequate at a reasonable level. The growth of money supply and aggregate financing to the real economy (AFRE) will be generally in line with nominal GDP growth, and the macro leverage ratio will be kept basically stable. The PBC will further bring into play the propelling force of central bank lending, central bank discounts, as well as the monetary policy tools that provide direct support for the real economy, to increase financial support for sci-tech innovation, micro and small businesses (MSBs) and green development, and to continue to implement the policy of deferred repayments on MSB loans and the support scheme for unsecured loans. The supply-side structural reform of the financial sector will be deepened to guide large-sized banks to increase the availability of financial services at the community level and encourage small and medium-sized banks to focus on their primary responsibilities and businesses, so as to enhance the vitality and resilience of the financial market and foster a modern financial market that features great adaptability, competitiveness and inclusiveness. The PBC will also strive to remove obstacles in monetary policy transmission. It will continue to unleash the potential of the reform to lower lending rates, consolidate the progress made in lowering real lending rates, and help steadily reduce overall financing costs for businesses. We will build the systems and mechanisms needed to provide effective financial support for the real economy, improve the system for providing financial support for innovation, and develop funding chains for innovation chains and industrial chains, thereby creating a virtuous circle and interaction among the financial sector, the sci-tech sector and industries. The PBC will guide financial institutions to increase the issuance of medium and long-term (MLT) loans to the manufacturing sector, strive to make financial support for private enterprises commensurate with the latter’s contribution to economic and social development, and improve the green finance system with an aim to having carbon dioxide emissions peak before 2030 and achieving carbon neutrality before 2060. With innovation and high-quality supply leading and creating new demands, the PBC will make its contribution to accelerating the establishment of a new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. Measures will also be taken to advance the higher-level two-way opening-up of the financial sector, and improve economic and financial oversight and risk control capability in an open economy.
It was emphasized at the meeting that the PBC will follow the guidance of the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, earnestly implement the guidelines of the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China (CPC) and the 2020 Central Economic Work Conference, act in accordance with the decisions and arrangements made by the CPC Central Committee and the State Council, uphold the general principle of pursuing progress while ensuring stability, and prioritize stability and refrain from making abrupt changes. Based on the new development stage, the PBC will apply the new development philosophy, build the new development paradigm, focus on promoting high-quality development, pursue supply-side structural reform as its main task, stay committed to the strategy of expanding domestic demand, and consolidate and expand achievements made in pandemic containment and economic and social development. The PBC will ensure stability on six fronts, namely, employment, the financial sector, foreign trade, foreign investment, domestic investment and expectations, and maintain security in six areas, namely, employment, the people’s basic livelihood, the operations of market entities, food and energy, stable industrial and supply chains, as well as the normal functioning of primary-level governments, so as to get off to a good start for the 14th Five-Year Plan period with high-quality development. The PBC will deepen reforms to make the interest rate and exchange rate more market-based, improve the market-oriented interest rate formation and transmission mechanism, guide enterprises and financial institutions to remain risk neutral, stabilize market expectations, and keep the RMB exchange rate basically stable at an adaptive and equilibrium level. The relationship between economic recovery and risk prevention and control will be handled properly, and the bottom line that no systemic financial risk should occur will be firmly defended.
Yi Gang, Governor of the PBC and Chairman of the Monetary Policy Committee, chaired the meeting. Monetary Policy Committee members including Ding Xuedong, Zou Jiayi, Liu Guoqiang, Guo Shuqing, Yi Huiman, Pan Gongsheng, Tian Guoli, Liu Shijin and Ma Jun attended the meeting. Lian Weiliang, Chen Yulu, Ning Jizhe and Liu Wei took a leave of absence for official businesses. Representatives from the Guangzhou Branch, Operations Office (Beijing) and Chongqing Operations Office of the PBC attended the meeting as observers.
