China's Central Bank Will Keep Policy Appropriate and Supportive: Governor

🎥 Feb 16, 2022 📺 BloombergTelevision ⏱ 8m

People's Bank of China Governor Yi Gang says the central bank will keep its policy flexible, and that the growth is expected to return its to potential level this year. He delivered videotaped remarks ahead of a meeting of central bank chiefs and finance ministers from the Group of 20 nations in Jakarta.

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About Yi Gang

Yi Gang, governor of the People's Bank of China (PBoC), has emphasized the central bank's role in promoting green finance and supporting economic recovery. In a June 2022 interview, he stated that the PBoC has launched monetary policy instruments such as a carbon emission reduction facility and a special lending facility for green and efficient use of coal, both providing funds to qualified commercial banks at a 1.75 percent interest rate. He noted that as of the end of May 2022, the PBoC had provided over 210 billion yuan through these facilities, reducing emissions by over 60 million metric tons of carbon dioxide equivalents. Yi Gang also said that the PBoC and the European Commission had published a common ground taxonomy proposing 55 mutually recognized economic activities to mitigate climate change, later upgraded to include 17 additional activities. He described the PBoC's monetary policy as accommodative, supporting the real economy and small and medium-sized enterprises, and stated that the central bank would continue to be accommodative while emphasizing structural policies. In earlier remarks, Yi Gang addressed a range of topics including economic growth, data protection, and financial opening. In February 2022, he said he expected China's growth to return to its potential in 2022, though volatile conditions posed challenges, and that the PBoC would keep its accommodative monetary policy flexible and appropriate. During a December 2021 fintech speech, he highlighted the importance of personal data protection, noting that China had promulgated the Data Security Law and the Personal Information Protection Law in 2021, and that the PBoC had focused on cracking down on excessive collection of consumer data. He also discussed the PBoC's role in promoting local currency use in regional trade and investment, citing currency swap agreements among ASEAN+3 countries totaling about 300–380 billion U.S. dollars. Yi Gang has consistently advocated for financial sector opening, including abolishing shareholding limits for foreign investors in certain financial sectors and implementing pre-establishment national treatment and negative list systems.

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Transcript (11 segments)

Yi Gang0:12

On currency diversification first, a few words on China's economy. In 2021, China's GDP grew by 8.1%. The labor market remains stable, with the urban survey unemployment rate averaging 5.1%. CPI increased by about 1% year-on-year, whereas the PPI producer price index was up by 8%. PPI has been trending down from its peak last October.

This requires better intertemporal and countercyclical adjustments. Therefore, we will keep our accommodative monetary policy flexible and appropriate and increase support for key areas and weak links in the economy.

Major advanced economies have shifted their policy stance in recent months. Global financial conditions may see more changes in the near term.

Since the outbreak of the global financial crisis, many emerging markets have strengthened their own financial systems and worked together to build regional financial safety nets. However, this weak healthcare system and the relatively low vaccination rates – COVID-19 is posing a greater danger to emerging markets. Once external financial conditions tighten, they are more prone to be affected.

Meanwhile, emerging markets should improve their resilience. This is where regional financial cooperation has a key role to play. In recent years, emerging markets in Asia have witnessed substantial progress in local currency usage in regional trade and investment. As a result, Asian economies are more resilient to external shocks.

First, currency swaps help to boost the global financial safety net. These swap lines, worth 380 billion US dollars, form the backstop for regional monetary and financial stability.

Second, currency swaps help facilitate bilateral trade and investment. In the wake of the global financial crisis, China signed currency swap agreements with many Asian economies in response to growing demand for the renminbi.

We expanded its size from 31 billion US dollars to 39 billion. Since 2016, Thailand, Malaysia, Indonesia, the Philippines, and Japan have established bilateral local currency settlement frameworks with each other. Some of them even extended the coverage of the framework from trade to direct investment. ASEAN passed general guidelines on LCSF.

And launched the renminbi rupiah regional direct trading in a matter of a few months. Renminbi receipts and payments amounted to nearly 1.4 billion yuan as of December 2021 through LCSF. And renminbi settlement in goods trade increased by nearly 5%. The LCSF has reduced exchange risk and currency exchange cost.

Local currency in trade and investment not only advanced bilateral economic and trade cooperation throughout the entire process, the PBoC has worked to improve supporting measures and reduce cross-border restrictions on the use of local currencies to make sure that market forces always stay the key driver. For example, China UnionPay cooperates with Indonesian banks.

Indonesia has given to UnionPay and the cooperation between the financial institutions of our two countries. Going forward, China stands ready to work with Indonesia and other Asian economies to promote the use of local currencies in regional trade and investment, enhance our resilience to external shocks, and promote a future of inclusive growth, stability, and prosperity. Thank you very much.