In October 2021, Financial Street Forum Annual Conference was held in Beijing with theme of “Economic Resilience and Financial Actions”, focusing on financial development and digital finance.
LIU He: Supporting Private Economy and Small and Micro Enterprises, Expediting Low-carbon Development and Further Opening-up
H.H. LIU He
Vice Premier, State Council of the People’s Republic of China
Liu He noted that China is a super-large economy with strong resilience. He stressed that the financial system needs to be more proactive. The financial system should better serve the real economy, properly adjust monetary policy, and increase financing support for small and micro businesses in the private sector. We need to support green and low-carbon development, the clean and efficient use of coal and the development and utilization of new energy, ensure energy security and work to achieve the carbon peak and carbon neutrality goals. We need to promote high-level opening-up, create a fair market environment and protect the legitimate rights and interests of foreign institutions in China. We need to pay more attention to Fintech, improve the quality and efficiency of financial services, and strengthen the capacity building of technology regulation. We will also coordinate the prevention and control of financial risks and strike a dynamic balance between preventing risks and ensuring steady development.
YI Gang: Finance Enhances Efficiency and Resilience of Economic Development
H.E. YI Gang
Governor, People’s Bank of China (PBOC)
China’s market players have shown resilience to external shocks to the economy. The main function of finance is to better allocate financial resources, while providing financial services like risk management to market. In the process of discovering prices, the economy is very resilient, with internal self-regulation mechanisms. This empowers all market stakeholders, including small and micro enterprises, to obtain financing and healthy growth.
With this mechanisms, financial market further discovers and adjusts prices. Through this continuous adjustment, cost of financing for market players is reduced. This helps to solve the long-standing challenges of difficult and costly financing, also improve financial inclusion.
Together, the functions of finance and market mechanisms can make markets more resilient and more efficient in allocating resources so that they flow to the most competitive companies in all sectors. Once price mismatch happens, the price will be quickly adjusted and risks can be diversified, making the entire system dynamic, resilient, self-adjusted and self-stabilized.
GUO Shuqing: How Finance Serves Development
H.E. GUO Shuqing
Party Committee Secretary, People’s Bank of China (PBOC)
Chairman, China Banking and Insurance Regulatory Commission (CBIRC)
Firstly, financial sector should promote the healthy development of urban and rural areas. Financial development should align with population movement, particularly with the industrial restructuring behind this movement and change in urban and rural economy. Finance should also focus on the growth of social wellbeing.
Secondly, financial sector should improve the insurance and safeguard of the society. While insurance sector participating disaster risk management, it must firstly include insurance into the national system on disaster relief and emergency management. It should strengthen the synergy with agriculture, geology, meteorology, water conservancy and emergency management. In addition, it should advance the formation of multi-tiered risk dispersion, increasing the supply in reinsurance services to enhance the capacity in risk transfer and dispersion.
Thirdly, financial sector should endorse the education system. Finance should effectively fulfill its social responsibility, play its advantages in capital and technology, support digital development of rural education, and advance professional education.
Fourthly, financial sector should grasp the actual demand for infrastructure construction and operation, and effectively provide financial services. Finance should strive to achieve sustainability in ecology and environment, sustainability in economy and society, as well as sustainability in finance.
YI Huiman: Advance Beijing Stock Exchange and Bond Market
H.E. YI Huiman
Chairman, China Securities Regulatory Commission (CSRC)
We should give full play to the functions of capital market, enhancing the vitality and resilience of the economy.
Firstly, we should: 1) prudentially promote the reform of China capital market around registered system; 2) advance the virtuous cycle of economy and finance; 3) strengthen supervision on financing and M&A in specific fields; 4) reduce risk spillover; 5) establish the accountability mechanism and institution against unfettered expansion of capital; 6) capitalize on proactive regulation to balance the industry regulation and development.
Secondly, we need to develop the multi-tiered market system of equities and continue expanding the service coverage.
Thirdly, we need to: 1) promote the sustainable development of bond market and improve innovation in both institution and product; 2) improve legal and institutional environment around registered system of bond issuance; 3) restrain the over bond financing and prevent over leveraging; 4) strengthen law enforcement of bond market and manage bond default risk appropriately.
PAN Gongsheng: Foreign Exchange Market and Fed’s Policy Shift
H.E. PAN Gongsheng
Deputy Governor, People’s Bank of China (PBOC)
Administrator, State Administration of Foreign Exchange (SAFE)
The global economy recovered quickly, fueled by policy stimulus and vaccination. The rapid economic recovery and continued high inflation prompted central banks in advanced economies to signal a shift in monetary policy.
The Fed’s tapering was well anticipated and the timing of the first rate-rise has also been brought forward to the second half of 2022. Other central banks including ECB and the Bank of England have also strengthened their tightening stance.
In this round of Federal Reserve monetary policy tightening cycle, the economic growth gap and monetary policy gap between the US and non-US economies are smaller than in the previous round of tightening cycle. That is expected to limit dollar appreciation. Emerging markets are also less exposed to capital outflows than they were during the last round of Fed tightening. The vulnerability of emerging markets’ external accounts has declined. The current account has generally improved significantly compared with the period of 2013-2015, and capital inflows have also been limited in recent years.
Influence on China’s foreign exchange market from the Fed’s recent policy shift is under control. Cross-border capital flow is expected to continue, and RMB foreign exchange rate will remain stable at reasonable equilibrium. There are multiple underlying reasons. Firstly, Chinese economy is currently in a better cyclical position. Secondly, The RMB exchange rate has become more flexible and can better play its role of self-regulation. Thirdly, China’s capital inflow structure has improved, and outbound investment has become more stable.
