Since the beginning of 2022, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, regions across Ch...
Since the beginning of 2022, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, regions across China and all government departments and agencies coordinated COVID-19 containment and social and economic development amid profound changes unseen in a century, which were compounded by the pandemic. The national economy had a smooth start to the year with the GDP and the CPI registering year-on-year growth of 4.8 percent and 1.1 percent, respectively, in Q1. Following the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the People's Bank of China (PBC) resolutely implemented the decisions and arrangements of the CPC Central Committee and the State Council. Seeking progress while ensuring stability, with the latter as a top priority, the PBC pursued a sound monetary policy, which was flexible and appropriate, and it introduced policies in a proactive way, thereby helping to maintain the stability of the national economy. First,
liquidity was kept adequate at a reasonable level. On April 15, the PBC announced a required reserve ratio (RRR) cut by 0.25 percentage points for financial institutions, which released about RMB530 billion of long-term liquidity. In the first four months, the PBC acted proactively and turned over its accumulated profits in the amount of RMB600 billion to the central government, which could be equal to an injection of base money of the same amount. In Q1, the PBC injected RMB400 billion of long-term liquidity in the market through the Medium-term Lending Facility (MLF) operations. Those moves were to guide financial institutions to make appropriate arrangements for loan issuances and enhance the stability of the aggregate credit growth. Second, monetary policy instruments were given full play in adjusting both the aggregate and the structure. The PBC made full use of the facilities supporting inclusive micro and small business (MSB) loans, increased central bank lending for agro-related businesses and MSBs, and ensured good use of the carbon emission reduction facility (CERF)
. In addition, it launched two new central bank lending facilities, one in the amount of RMB200 billion for sci-tech innovation and the other in the amount of RMB40 billion for inclusive elderly care services, and it provided an additional RMB100 billion quota for the central bank lending supporting coal development and utilization as well as reserve capacity enhancement. Multiple measures were rolled out to support coordinated development across regions. Third, the overall financing costs for businesses were guided to remain stable with a slight decline. In January, with the rates on 1-year MLF operations and 7-day open market operations (OMOs) both dropping 10 basis points (bps), the one-year and above-five-year loan prime rates (LPR) declined 10 bps and 5 bps, respectively, due to the effect of the LPR reform. Financial II institutions were thus guided to forgo some profits to benefit the real economy. Fourth, attention was paid to maintaining a balance between internal and external equilibria. While deepening the market-oriented reform of the exchange rate and maintaining a managed floating exchange rate regime based on market supply and demand with reference to a basket of currencies, the PBC enhanced the flexibility of the RMB exchange rate and strengthened expectation management to give play to the role of the exchange rate in macroeconomic management and as an auto stabilizer for the balance of payments. Fifth, important achievements were made in forestalling and defusing financial risks. The PBC upheld market principles and the rule of law for risk resolution, and financial risks were generally contained. Overall, since the beginning of 2022, the monetary policy has been more forwardlooking, precise, and independent backed by proactive measures, and the financial sector has been improving the quality and efficiency of its services for the real economy. In Q1, new RMB loans reached RMB8.3 trillion, RMB663.6 billion more than the growth during the same period of last year. At end-March, broad money (M2) and outstanding aggregate financing to the real economy (AFRE) recorded year-on-year growth of 9.7 percent and 10.6 percent, respectively, an acceleration of 0.7 and 0.3 percentage points from end-2021. Key areas and weak links, such as sci-tech innovation, green development, and MSBs, received more support from the financial sector. At endMarch, inclusive MSB loans and medium and long-term (MLT) loans to the manufacturing sector grew by 24.6 percent and 29.5 percent year on year, respectively.
In Q1, the weighted average rate on corporate loans registered 4.4 percent, down 0.21 percentage points from 2021. The RMB exchange rate moved in both directions and remained basically stable at an adaptive and equilibrium level. The central parity of the RMB against the US dollar was 6.3482 at end-March, an appreciation of 0.4 percent from end-2021. Recently, as risks and challenges rise due to COVID-19 and the Ukraine crisis, the environment for China’s economic development has become more complex and severe, with greater uncertainties. However, it should also be noted that our development still enjoys a fairly large number of strategic advantages, such as a large-scale economy, ample room for policy adjustments, high resilience, and an enormous market. Therefore, the fundamentals for sound growth over the long run remain unchanged.
In the next stage, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the PBC will follow the guidelines of the 19th CPC National Congress, the plenary sessions of the 19th CPC Central Committee, and the Central Economic Work Conference as well as the requirements set forth in the Report on the Work of the Government. Following the decisions and arrangements of the CPC III Central Committee and the State Council, the PBC will pursue progress while ensuring stability and take stability as its top priority. Applying the new development philosophy fully, faithfully, and comprehensively, it will speed up the building of a new development paradigm. It will work to ensure stability of growth, employment, and prices while deepening the supply-side structural reform. Meanwhile, it will develop a modern central banking system and improve the modern monetary policy framework. With these efforts, it will contribute to high-quality development and maintain macroeconomic stability.
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