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The monetary policy will continue to exert its strength from the total amount to support the economi

Date: 2022-06-29
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The website of the People's Bank of China reported on June 27th that recently, Yi Gang, governor of the People's Bank of China, accepted an exclusive interview with a reporter from China International Television (CGTN) on issues such as financial support for green transformation, green information disclosure, international cooperation in green finance, and monetary policy. In an exclusive interview, Yi Gang made it clear that monetary policy will continue to exert its total strength to support economic recovery, and at the same time, structural monetary policy tools such as supporting small and medium-sized enterprises and green transformation should be used well.

 

On monetary policy:

Continue to exert strength from the total amount

Regarding the orientation of the current monetary policy and the role it will play in supporting the national economic recovery, Yi Gang said that since the beginning of this year, due to the epidemic and external shocks, China's economy is facing certain downward pressure. The monetary policy will continue to exert its strength from the total amount to support the economic recovery. At the same time, we should also make good use of structural monetary policy tools such as supporting small and medium-sized enterprises and green transformation.

Yi Gang believes that China's monetary policy has always been compatible with supporting the development of the real economy. The growth rate of broad money M2 and social financing basically matches the growth rate of nominal GDP, keeps the liquidity reasonable and sufficient, and supports the development of small and medium-sized enterprises to achieve the goal of maximizing employment.

As far as interest rate is concerned, Yi Gang believes that in the past 10 years, China's market interest rate level has been stable and declining. The natural interest rate level is mainly determined by the marginal output rate of capital and the long-term development trend of population. China's interest rate formation mechanism is determined by market supply and demand, and the central bank guides the market interest rate by using monetary policy tools. At present, the interest rate of time deposits is 1%-2%, and the interest rate of bank loans is 4%-5%. Meanwhile, the bond and stock markets operate effectively. Considering the inflation level, it can be seen that the real interest rate level is quite low, and the financial market can effectively allocate resources.

In terms of inflation, Yi Gang said that China's inflation prospect is relatively stable, with CPI increasing by 2.1% year on year and PPI by 6.4% year on year. 'Maintaining price stability and maximizing employment is the focus of our work.' He said.

 

Talking about green transformation:

Promote through structural monetary policy

In terms of green transformation, Yi Gang believes that the central bank can play an important and positive role in the green transformation, and the international community has reached a consensus on this. As far as monetary policy is concerned, the first and most important duty of the central bank is to maintain price stability. However, some central banks still have policy space to promote green transformation through structural monetary policies.

'To promote green transformation, the People's Bank of China has done a lot of work.' Yi Gang introduced that in 2018, the People's Bank of China included high-quality green bonds and loans into the scope of qualified collateral for medium-term lending facilities. Last year, it launched two new monetary policy tools, namely, carbon emission reduction support tools and special refinancing tools to support clean and efficient use of coal. The interest rates are all 1.75%, which supports qualified financial institutions to provide low-cost financing for projects with significant carbon emission reduction effects.

In addition, as of the end of May this year, the People's Bank of China has distributed more than 210 billion yuan of funds to relevant financial institutions through two tools, driving the reduction of carbon emissions by over 60 million tons of carbon dioxide equivalent, accounting for about 0.6% of China's annual carbon emissions; Last May, the People's Bank of China revised and issued the 'Green Finance Evaluation Program for Banking Financial Institutions', which included the green loans and green bonds issued by financial institutions into the rating of financial institutions of the central bank, so as to encourage financial institutions to provide support for green transformation.

'As of March this year, the balance of green loans in China has exceeded 18 trillion yuan, with a rapid growth. The balance of green bonds in China is about 1.3 trillion yuan, ranking first in the world. ' Yi Gang said.

 

On green information disclosure;

Is the key to promoting green transformation

'Information disclosure is very important and the key to promoting green transformation.' Yi Gang believes that in order to implement green monetary policy tools fairly and efficiently, we should pay attention to guard against various moral hazard problems such as 'green washing', arbitrage of low-cost funds, and falsification of green projects in practice. Therefore, in the whole process of designing and implementing monetary policy tools to support green transformation, information should be open and transparent, and supervision should be strictly in place.

For example, Yi Gang said that carbon emission reduction support tools require financial institutions to publicly disclose information such as the amount of carbon emission reduction loans, interest rates, the number of supported projects, and the amount of carbon emission reduction driven by loans on a quarterly basis. The People's Bank of China will work with other departments and independent third-party professional organizations to verify the disclosed information. It is also very important for the public to know and supervise this.

'To promote climate risk management, the People's Bank of China conducted the first climate risk stress test last year. From the test situation, inadequate disclosure of carbon emission information is still the biggest challenge currently facing. ' Yi Gang said that in order to promote the disclosure of climate information, the People's Bank of China issued the Guidelines for Environmental Information Disclosure of Financial Institutions last year, which put forward requirements on the form, frequency, qualitative and quantitative information to be disclosed by financial institutions, and has instructed more than 200 financial institutions to try to prepare environmental information disclosure reports, including the identification, assessment, management and control processes of environmental risks. Information such as the issuance of carbon emission reduction loans verified by third-party professional institutions and the scale of carbon emission reduction driven by them will be extended to the whole country in due course in the future.

 

On international cooperation of green finance;

Continue to promote through multi-bilateral platforms

Yi Gang said that in the international arena, the People's Bank of China, together with other parties, actively guides market funds to support climate change response. First, co-lead the G20 Sustainable Finance Working Group; Second, it has achieved phased results in promoting the convergence of green financial classification standards with the European side; The third is to build a green 'the belt and road initiative' with green finance.

In addition, Yi Gang said that the People's Bank of China has also carried out exchanges and cooperation in various fields with the central bank and regulators, such as the Green Financial Network (NGFS), the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS), to promote the improvement of green financial supervision standards. In the next step, the People's Bank of China will continue to promote international cooperation in green finance through multi-bilateral platforms, so as to better serve China to achieve the goal of peak carbon dioxide emissions and carbon neutrality.


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