Huge amount of information! The central bank's press conference released major signals involving RRR cuts and interest rate cuts, monetary policy, exchange rates, and the private economy.

On January 24, the State Council Information Office held a press conference on "Implementing the deployment of the Central Economic Work Conference and the high-quality development of financial services for the real economy." Pan Gongsheng, Governor of the People's Bank of China, Zhu Hexin, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, and Xuan Changneng, Deputy Governor of the People's Bank of China attended the meeting and answered questions from reporters.

Quick overview of key points:

1. Focus on five aspects of work in 2024

2. Will the Fed’s interest rate hike affect China’s monetary policy control space?

3. Predict the stability of cross-border capital flows to further improve

4. The reform of foreign exchange facilitation must continue to do a good job in five aspects

5. How to deal with possible deflation risks

6. Announcing a reserve requirement ratio cut on February 5 and a targeted interest rate cut on January 25

7. How to deal with large fluctuations in individual quarterly or monthly data?

8. Preventing and controlling financial risks is an eternal theme of financial work

9. What is the expected exchange rate trend in 2024?

10. Give full play to the positive role of interest rate policy in promoting consumption, stabilizing investment, and expanding domestic demand.

11. How to implement and accelerate the construction of a financial power?

12. To prepare five major articles, we must pay more attention to financial support for the development of private economy.

13. Proposed six measures to deepen financial cooperation between Hong Kong and the Mainland

1. Focus on five aspects of work in 2024

Pan Gongsheng said that in 2024, the central bank will focus on the following tasks:

First, adhere to a prudent monetary policy, implement the requirements of flexibility, appropriateness, precision and effectiveness, and continue to create a good monetary and financial environment for the stable growth of the real economy. We should pay attention to revitalizing financial resources that are inefficiently occupied and improve the efficiency of the use of existing funds.

The second is to increase financial support for major strategies, key areas and weak links, and do a good job in the "five major articles" of finance. In the next step, we will continue to give full play to the dual functions of the total volume and structure of monetary policy tools and strengthen tool innovation. With the approval of the central government, the People's Bank of China will establish a credit market department to focus on work related to the five major articles.

The third is to steadily and effectively prevent and resolve financial risks in key areas. The next step will be to strengthen the construction of financial risk monitoring, early warning and assessment capabilities, and promote the establishment of a financial risk disposal responsibility mechanism with equal rights and responsibilities and compatible incentives and constraints. We will improve the financial safety net and continue to promote financial stability legislation.

Fourth, we will continue to deepen financial reform and opening up. On the one hand, we will deepen financial reform. Further promote the development of the credit reporting market and payment market. Recently, the People's Bank of China is working with the Zhejiang Provincial Government to guide Qiantang Credit Bureau to apply for a personal credit license. On the other hand, we will unswervingly promote high-level opening up of the financial industry. Deepen the institutional opening up of the financial sector and expand the interconnection of domestic and overseas financial markets. We will steadily and steadily advance the internationalization of the RMB. Continue to support Hong Kong and Shanghai in improving their status as international financial centers.

Fifth, actively participate in international financial governance and deepen international financial cooperation. We should practice multilateralism, strengthen dialogue and communication, and rely on platforms such as the G20, the International Monetary Fund, and the Bank for International Settlements to promote global macroeconomic and financial policy coordination.

2. Will the Fed’s interest rate hike affect China’s monetary policy control space?

Pan Gongsheng said that China’s monetary policy has always been focused on China, while taking into account internal and external balance. In 2023, facing the spillover effects of the monetary policies of developed economies, the People's Bank of China lowered the policy interest rate twice and the deposit reserve ratio twice based on domestic economic development, maintaining reasonable and sufficient market liquidity and optimizing the credit structure. Strongly supported the real economy. At the same time, the People's Bank of China and the State Administration of Foreign Exchange have stabilized market expectations through macro-prudential management and other measures based on supply and demand in the foreign exchange market. Overall, the RMB exchange rate has remained basically stable despite the complex situation.

Generally speaking, in 2024, the spillover of monetary policies in developed economies will develop in the direction of reducing pressure, and the cyclical differences between China and the United States' monetary policies are converging. Such a change in the external environment is objectively conducive to strengthening China's monetary policy operations. autonomy and expand the space for monetary policy operations.

3. Predict the stability of cross-border capital flows to further improve

Zhu Hexin said that judging from the statistics of the State Administration of Foreign Exchange, it should be said that my country's cross-border capital flows have been more stable recently, as reflected in the current account's continued high-scale net inflows. The current account surplus for the whole year of 2023 will reach about 280 billion US dollars, of which the goods trade surplus will exceed 600 billion US dollars, which is also the second highest value in history. Moreover, foreign investment in China has also shown a positive trend recently. Everyone has also noticed that since September last year, foreign capital’s net increase in domestic bond holdings for four consecutive months has exceeded US$64 billion. We predict that the stability of my country's cross-border capital flows will further improve this year, the current account will maintain a reasonable size surplus, and foreign capital inflows under the capital account will become more active.

4. The reform of foreign exchange facilitation must continue to do a good job in five aspects

Zhu Hexin said that the general direction of foreign exchange facilitation is to deepen reform and promote the process of facilitation on the basis of coordinating high-quality development and high-level security. Its purpose is to serve the real economy and make the economy rebound and improve in the long term. The situation is more stable.

There are five specific aspects: First, continue to make efforts to actively promote cross-border trade and investment and financing facilitation; second, continue to make efforts to steadily promote high-level institutional opening; third, continue to make efforts to promote the internationalization of the RMB in a prudent and solid manner. Fourth, we must continue to work hard to improve the two-in-one management of "macro-prudential + micro-supervision" in the foreign exchange market; Fifth, we must continue to work hard to improve the operation and management of foreign exchange reserves with Chinese characteristics, and make every effort to ensure the safe flow and safety of foreign exchange reserve assets. Increasing the value of.

5. How to deal with possible deflation risks

Pan Gongsheng said that in the use of monetary policy tools, the People's Bank of China will strengthen inter-cyclical and counter-cyclical adjustments to create a good monetary and financial environment for economic growth and price stability.

First, maintaining price stability and promoting a moderate price recovery are important considerations in controlling monetary policy. We must adhere to the objectives of monetary policy, maintain currency value stability, and promote economic growth. The second is to optimize the investment of financial resources. Guide financial institutions to scientifically assess risks, restrict the supply of financing to industries with overcapacity, and at the same time meet reasonable consumer financing needs in a more targeted manner. The third is to strengthen the coordination and cooperation of financial policies and other policies. This is a more macro issue that goes beyond the scope of finance. It is necessary to use the synergy of policies to increase residents' income, expand employment, improve the social security system, deeply implement the consumption-driven strategy, focus on supporting the expansion of domestic demand, promote the matching of supply and demand, and promote a virtuous economic cycle

6. Announcing a reserve requirement ratio cut on February 5 and a targeted interest rate cut on January 25

Pan Gongsheng said that at present, my country's monetary policy still has enough space. We will balance the relationship between short-term and long-term, stable growth and risk prevention, internal balance and external balance, strengthen counter-cyclical and inter-cyclical adjustment, and create a good environment for economic operation. Monetary and financial environment.

The central bank will lower the deposit reserve ratio by 0.5 percentage points on February 5 to provide the market with long-term liquidity of 1 trillion yuan. Tomorrow we will start to lower the re-lending and re-discount rates to support agriculture and small businesses by 0.25 percentage points. At the same time, we will continue to promote a steady but moderate decrease in comprehensive social financing costs. Specifically: first, maintain reasonable growth in terms of total volume; second, in terms of prices, mainly interest rates and exchange rates, taking into account internal and external balance; third, focus on improving efficiency in terms of structure; fourth, form synergy in policy coordination.

7. How to deal with large fluctuations in individual quarterly or monthly data?

Xuanchangneng said that based on the situation over the years, there will be more new loans in the first quarter, especially January. April, July, and October are all small months for loans. This seasonal pattern is largely related to economic and financial Objective factors of operation. For example, people often say that "the plan for the year begins in spring." All types of business entities generally pursue a "good start." Large projects usually start construction at the beginning of the year, as well as preparations for spring plowing at the beginning of the year, and salary payments before the Spring Festival. to meet relatively concentrated financing needs. After the epidemic prevention and control phase was over, the credit demand accumulated over the past three years was released intensively, making the surge in loans in the first quarter of last year even more obvious.

Generally speaking, a rebound in the economy requires stable and continuous credit support. The key is to grasp the "degree" well, not only respecting objective laws, but also avoiding abnormal credit behaviors that significantly deviate from historical levels. Don’t read too much into the fluctuations of single-month credit data. You should adopt a more diversified perspective. You can not only look at the social financing scale covering a wider range, but also observe the changes in financing costs from the perspective of price or interest rate, and make a reasonable evaluation. Financial support to the economy.

8. Preventing and controlling financial risks is an eternal theme of financial work

Pan Gongsheng said that for the financial industry, preventing and controlling financial risks is an eternal theme of financial work. First, we must grasp the dynamic balance between economic growth, economic structural adjustment and financial risk prevention at the macro level. Second, we must strengthen financial supervision, improve financial risk prevention, early warning and disposal mechanisms, and build a solid financial safety net. Third, risks in key areas should be resolved in an orderly manner to promote the overall convergence of financial risks. Fourth, coordinate financial openness and security, and continuously improve the level of financial risk prevention and control under the open macro-structure.

9. What is the expected exchange rate trend in 2024?

Pan Gongsheng said that the short-term influencing factors of the exchange rate are diverse, such as economic growth, monetary policy, financial markets, geopolitics, risk events, etc. The medium- and long-term trends fundamentally depend on economic fundamentals. Therefore, we judge that the RMB exchange rate will continue to remain basically stable at a reasonable equilibrium level in 2024.

There are several factors supporting the RMB exchange rate: first, the domestic economy is operating steadily; second, there have been some changes in the external international financial environment; third, RMB assets have good investment and hedging value; fourth, the micro-foundation of exchange rate stability More solid.

In the next stage, the People's Bank of China and the State Administration of Foreign Exchange will continue to follow the decisions and arrangements of the Party Central Committee and the State Council, insist that the exchange rate is mainly determined by market supply and demand, maintain the flexibility of the RMB exchange rate, and give full play to the function of the exchange rate as an automatic stabilizer in regulating macroeconomics and the balance of payments. At the same time, we must adhere to bottom-line thinking, enrich response tools, prevent the risk of exchange rate overshooting, and prevent the formation of unilateral consensus expectations and their self-reinforcement.

10. Give full play to the positive role of interest rate policy in promoting consumption, stabilizing investment, and expanding domestic demand.

Xuanchangneng said that in 2023, the People's Bank of China has effectively implemented a series of interest rate policies to promote a significant reduction in comprehensive social financing costs. Overall, various measures have effectively promoted the significant decline in corporate financing and household consumer credit costs. In 2023, the weighted average interest rate of corporate loans will be 3.88%, a year-on-year decrease of 0.29 percentage points, continuing to hit a new low since statistics were collected; the interest rates of existing mortgage loans of more than 23 trillion yuan have been reduced, with an average decrease of 0.73 percentage points, reducing the interest expenses of mortgage borrowers every year About 170 billion yuan. The overall decline in interest rates has effectively reduced the interest burden of enterprises and residents, helped stimulate loan demand, optimized the allocation of financial resources, and better smoothed the domestic economic cycle.

In the next stage, the People's Bank of China will continue to use reforms to enhance the pertinence and synergy of interest rate policies, focus on China, balance internal and external policies, and further play the positive role of interest rate policies in promoting consumption, stabilizing investment, and expanding domestic demand.

11. How to implement and accelerate the construction of a financial power?

Pan Gongsheng said that building a financial power is a long-term goal and a systematic project. It requires adhering to the basic logic of marketization, rule of law, and internationalization. It requires long-term efforts and long-term success. We must adhere to the reform direction of the socialist market economy and continuously enhance and improve the function of the financial market in allocating resources. Continue to improve the financial rule of law and enhance the transparency, stability, and predictability of financial systems and policies. Coordinate the promotion of deep financial reform and high-level financial opening up, continue to promote the opening up of the financial services industry and financial markets, improve the level of trade, investment and financing facilitation, and strengthen financial security capacity building commensurate with the level of openness.

We will focus more on achieving the "dual goals" with "dual pillars" support, that is, improving the dual-pillar regulatory framework of monetary policy and macro-prudential policy, and achieving the dual goals of currency stability and financial stability. Accelerate the construction of a modern central bank system around responsibilities such as monetary policy, systemic financial risk prevention and control, financial stability and national financial security, international financial governance and cooperation, financial markets, financial infrastructure construction, financial management and services. Continue to promote financial supply-side structural reform, optimize the structure and layout of the financial institution system and financial markets, and accelerate the construction of a modern financial system with Chinese characteristics.

12. To prepare five major articles, we must pay more attention to financial support for the development of private economy.

Zhu Hexin said that when finance serves the real economy, the private economy is an important battlefield, and the People's Bank of China has done a lot of fruitful work in this regard. On the one hand, we adhere to the "two unwavering principles" and treat the private economy as our own family and treat state-owned enterprises equally. On the other hand, in terms of implementation, financial policies should be used to guide financial institutions to fully support the development of the private economy. In fact, the previously raised problem of “difficult and expensive financing” has been greatly alleviated.

Data show that at the end of last year, the loan balance of privately held enterprises exceeded 41.2 trillion yuan, an increase of 3.8 trillion yuan for the whole year, an increase of 950 billion yuan year-on-year; the number of credit households was 7.16 million, an increase of 1.16 million households throughout the year, an increase of 8% year-on-year. Thousands of households. The weighted average interest rate of newly issued loans to privately held enterprises in November was 4.24%, a decrease of 23 basis points from the same period last year.

He further pointed out, "This time everyone also paid attention to the central financial work conference's need to do a good job in the 'five major articles'. The five major articles are closely related to the private economy and private enterprises. We are doing a good job in the 'five major articles' Among them, more attention should be paid to financial support for the development of the private economy."

13. Proposed six measures to deepen financial cooperation between Hong Kong and the Mainland

Xuanchangneng introduced six measures to deepen financial cooperation between Hong Kong and the mainland. He said that the People's Bank of China and the Hong Kong Monetary Authority decided to launch six financial measures, which involve financial market interconnection, cross-border capital facilitation, and deepening financial cooperation, and can be summarized as "three connections and three conveniences."

Specifically: First, bonds under "Bond Connect" will be included as eligible collateral for the Hong Kong Monetary Authority's RMB liquidity arrangement. The second is to further open up foreign investors to participate in domestic bond repurchase business and support all overseas institutions that have entered the inter-bank bond market to participate in bond repurchase. This also includes the "Bond Connect" channel. The third is to release the implementation details for optimizing the "Cross-border Wealth Management Connect" business pilot in the Guangdong-Hong Kong-Macao Greater Bay Area to expand and facilitate individual investment channels in the Greater Bay Area. The fourth is to implement policies to facilitate payment for home purchases by Hong Kong and Macao residents in the Greater Bay Area to better meet the home purchase needs of Hong Kong and Macao residents. The fifth is to expand the scope of pilot projects for cross-border credit reporting cooperation between Shenzhen and Hong Kong to facilitate cross-border financing for Shenzhen and Hong Kong enterprises. The sixth is to deepen the cross-border pilot program of digital renminbi to bring more convenience to Hong Kong and mainland resident enterprises.