On April 16, the 2022 Tsinghua Wudaokou global financial forum with the theme of “stable and far-reaching development and financial assistance for high-quality development” was held in Beijing.
At the press conference of China’s financial policy report 2022, Lu Lei, deputy director of the State Administration of foreign exchange, Xing Wei, Secretary of the Party committee of Bank Of China Limited(601988) Industry Association, and Guan Tao, chief economist of Boc International (China) Co.Ltd(601696) world, offered suggestions one after another. They mentioned that China’s current economic development should pay attention to external factors such as the increase of interest rates by the Federal Reserve and the escalation of conflicts between Russia and Ukraine, as well as internal pressures such as China’s epidemic situation and financial risk control, This requires further exertion of the basic resource allocation and risk management functions of the financial system, and the banking industry to better play its role as the blood of economic flow in promoting high-quality economic development.
Lu Lei, deputy director of the State Administration of foreign exchange:
Accelerate the implementation of the financial stability law
Lu Lei, deputy director of the State Administration of foreign exchange, said at the meeting that China should pay attention to external factors such as global inflation exceeding expectations, the US Federal Reserve raising interest rates and the escalation of the conflict between Russia and Ukraine, as well as the pressure of China’s epidemic situation and financial risk control. New changes in the internal and external situation have put forward new requirements for financial work, further give play to the basic resource allocation and risk management functions of the financial system, and enhance the ability to serve the real economy.
Specifically, Lu Lei said frankly, “from the changes in the internal and external situation since last year, we need to pay attention to various risks and challenges.” Externally, first, global inflation is higher than expected and rising generally; Second, the conflict between Russia and Ukraine has led to the rapid rise and high fluctuation of global energy and food prices; Third, the Federal Reserve will likely raise interest rates rapidly and sharply and shrink the table. For China, first, the “Omicron” mutant strain has increased the pressure of imported epidemic situation faced by China. Second, the pressure of financial risk prevention and control in the process of economic transformation can not be ignored. Taking the real estate industry as an example, since the end of last year, China’s commercial housing prices have fallen, although the number of cities has declined, it is still at a high level.
“In the face of complex and changeable new situations and challenges, we should further give play to the basic resource allocation and risk management functions of the financial system and enhance the ability to serve the real economy.” Lu Lei believes that in terms of financial institutions, we should better carry out cross period resource allocation and risk management, make up for mistakes with abundance and stabilize the real economy against the cycle. First, financial institutions need to actively guide the flow of financial resources to scientific and technological innovation, green and low-carbon, advanced manufacturing and other fields, develop more products and services that meet the needs of science and technology, small enterprises and sunrise industries, promote the optimization and upgrading of financial structure and promote high-quality economic development. Second, financial institutions should further do a good job in intertemporal risk management, actively make good use of the natural advantages of financial institutions in price discovery, overcome Pro cyclical thinking, effectively manage and regulate their own pro cyclical behavior, explore intertemporal risk management methods to make up for mistakes with abundance, and play a greater role in preventing financial risks, especially major financial risks.
In terms of financial markets, we should improve competitiveness and the ability to absorb risks. First, we should enhance the competitiveness of the financial market. Further expand the opening-up of the financial market, enhance the endogenous driving force for the optimization and upgrading of the financial market through reform and opening-up, adhere to the principles of marketization, legalization and internationalization, continue to actively introduce the standards and norms of the international financial industry, improve the professional quality and comprehensive ability of financial practitioners, and enhance the modernization of corporate governance of financial institutions. Second, we should enhance the risk absorption capacity of the financial market, give full play to the role of finance as a risk “market maker” in the macro economy, give full play to the role of the reservoir of the financial market, effectively hedge, absorb and transform the risk contradictions accumulated in the economic operation, and create a favorable financial environment for the “six stabilities” and “six guarantees”.
Financial management departments should stick to the bottom line and ensure the smooth and healthy operation of the financial system. Maintaining financial stability, ensuring financial security and strictly controlling financial risks are the bounden duty of financial supervision departments. First, we should speed up the implementation of the financial stability law. On the basis of fully summarizing the practical experience of financial stability at home and abroad and widely soliciting the opinions and suggestions of all sectors of society, we should further improve and revise the draft financial stability law, continue to actively cooperate with the legislature to promote the follow-up legislation, and accelerate the implementation of the financial stability law. Second, we should accelerate the establishment of a financial stability guarantee fund in line with China’s national conditions. To build a strong financial country, China also needs to take the financial stability guarantee fund as an important part of China’s national major financial risk disposal reserve fund pool and the long-term mechanism of financial stability. We should continue to improve the management and use of financial stability guarantee funds, innovate the sources of financial stability guarantee funds, formulate detailed rules for the use of financial stability guarantee funds, and form an efficient financial safety net that complements and cooperates with existing deposit insurance funds and industry guarantee funds.
Bank Of China Limited(601988) Industry Association party secretary Xing Wei:
Banking promotes high-quality economic development
At present, we are in a situation of great change that has not been seen in a century. Facing multiple difficulties and contradictions such as epidemic prevention and control, Russia Ukraine conflict and the dilemma of China US relations, while the global economy is facing stagflation, China’s economy is also facing great difficulties. Under the national policy of “stability first and seeking progress in stability”, as a banking industry with serving the real economy as the first priority, we should better play its role as the blood of economic flow in promoting high-quality economic development.
Xing Wei, Secretary of the Party committee of Bank Of China Limited(601988) Industry Association, said that it should be recognized that with the economy changing from high-speed development stage to high-quality development stage, the banking industry has also encountered some new problems in serving the new economy, new models and new business forms.
Xing Wei pointed out that six major problems need to be solved. First, the field of service inclusion needs to be deepened. Including the problem of information asymmetry and difficulties in docking “specialized and special new” enterprises. Second, there are still bottlenecks in service scientific and technological innovation. Including bank credit access standards do not match the needs of scientific and technological innovation enterprises, the value evaluation and risk evaluation system of scientific and technological innovation still needs to be improved, and the intellectual property valuation, pledge and circulation system is not perfect. Third, there are still deficiencies in serving the development of green finance, including non-uniform green standards, mismatch between risk and income, unbalanced product supply and imperfect trading market. Fourth, there are still shortcomings in serving rural revitalization, including insufficient variety of products, difficult and costly access to rural customer information, and imperfect supporting mechanisms in rural areas. Fifth, the service digital economy needs to be innovated, including the shortcomings of the digital transformation of the banking industry itself and the urgent need for innovation of the service model. Sixth, comprehensive risk control needs to be strengthened.
In view of the above problems, Xing Wei put forward suggestions. First, banks themselves need to do a good job in financial services around key economic areas and weak links, and make every effort to maintain the stability of the macro-economic market. Focus on technology and self-reliance; Pay close attention to weak areas and improve high-quality development; Pay close attention to the integration of digital industry and strengthen and optimize the digital economy; In the current new situation, we need to pay attention to the balance between risk prevention and development, improve market adaptability and sensitivity, and further optimize and improve relevant systems and mechanisms.
Second, the financial management department can formulate and issue relevant policy guidelines to stimulate the internal driving force of the banking industry to support high-quality development.
It includes unifying financial standards, strengthening financial incentive mechanism, improving risk tolerance of supervision, continuously strengthening the disposal of non-performing assets, establishing financial stability guarantee fund, etc.
Third, relevant functional departments should further improve the infrastructure and supporting facilities to provide assistance for the banking industry to better serve the high-quality development of the economy. Including the integration and establishment of information sharing platform, the establishment of professional technology evaluation and trading institutions, and the improvement of risk compensation mechanism.
Boc International (China) Co.Ltd(601696) global chief economist Guan Tao:
Pay close attention to and be vigilant against the impact of Fed tightening
Boc International (China) Co.Ltd(601696) global chief economist Guan Tao made a prospect on the trend and policy of RMB exchange rate in 2022 at the meeting. The tightening policy of the Federal Reserve is an important factor affecting China’s cross-border asset flows and the trend of RMB exchange rate.
Specifically, there are four scenarios for the impact of the Fed’s tightening policy on the RMB exchange rate and cross-border capital flows:
The first scenario is the moderate and orderly tightening of the Federal Reserve, the slowdown of China’s foreign capital inflow and the slowdown of RMB appreciation. Under the influence of the escalation of the conflict between Russia and Ukraine, there was a phased outflow of foreign capital from the market after the end of February, and the RMB exchange rate callback was obvious.
In the second scenario, if the Fed’s monetary tightening intensifies, the local economic and financial turmoil intensifies, China’s phased capital outflow, and the RMB exchange rate fluctuates in both directions. Compared with the “811 foreign exchange reform” in 2015, the adaptability of two-way fluctuations has been greatly strengthened, and the mismatch of private currencies has also been significantly improved, so there will be no fear of devaluation, which has been tested by market pressure.
The third scenario is that if the Fed tightens its efforts beyond expectations, punctures foam assets and causes economic recession, the RMB exchange rate will be weakened again. Powell insisted that raising interest rates would not trigger a “hard landing”, which may be based on professional rather than professional judgment. Recently, there has been an inverted interest rate spread between China and the United States in the market, and even the long-term and short-term interest rate inversion in the United States itself. It should be noted that at present, China’s economy and finance are more integrated into globalization. In case of global financial turmoil and economic recession, it may be difficult for China to survive, and the RMB exchange rate will be under pressure again.
In the fourth scenario, if the Fed’s monetary policy returns to easing, the RMB exchange rate may be stronger, depending on whether China can maintain the leading edge of economic recovery. If China can continue to maintain the leading position of economic recovery in the world, China may repeat the situation from 2009 to 2013. Capital inflows, China has become a haven for international capital, and the RMB exchange rate will be stronger. The premise is whether we can make good use of the normal monetary policy space and maintain the leading position of economic recovery in the world. Therefore, the fourth scenario actually depends on whether we can do our own thing well.
“Through the description of the above four scenarios, we find that we have passed the first stage of Fed tightening relatively smoothly, but we still need to pay high attention and vigilance to the future, because the development and change of the situation is not linear, but may be nonlinear.” Guan Tao stressed that relevant policies in 2022 should also pay attention to changes in the situation.
First, we will continue to steadily deepen the market-oriented reform of the exchange rate. Including improving the exchange rate system, strengthening the expectation management, guiding enterprises to further improve the exchange rate risk management, and better adapt to the increase of exchange rate flexibility.
Second, continue to steadily and prudently promote the internationalization of RMB, including deepening foreign currency cooperation and developing the offshore RMB market; Carry out high-level pilot opening-up of cross-border trade; Strengthen support for the construction of RMB offshore center in Hong Kong.
Third, prevent and resolve the risk of external shocks. We will strengthen the testing, judgment and macro Prudential Management of the foreign exchange market, strengthen risk prevention and control in key areas of foreign exchange, and maintain the stable operation of the foreign exchange market.
Fourth, deepen reform and opening up in the field of foreign exchange. Including the opening of capital account, the construction of foreign exchange market, the reform of foreign exchange management, deepening the facilitation reform of traditional trade forms, promoting the standardized and innovative development of new forms of foreign trade, and optimizing foreign exchange services, especially for small and medium-sized enterprises.
Fifth, improve the micro supervision of the foreign exchange market. Improve the authenticity audit methods of bank foreign exchange business, and improve the micro supervision practices of foreign exchange market. We should fully reflect the neutrality of regulatory policies and adhere to the consistency, stability and predictability of external market micro regulatory law enforcement standards across cycles, that is, the policy neutrality of foreign exchange regulation.
Sixth, improve the operation and management of foreign exchange reserves. We will ensure the safety, liquidity, value preservation and appreciation of foreign exchange reserve assets, promote the construction of professional investment capacity, scientific and technological operation and management capacity, and market-oriented institutional governance capacity.
Seventh, consolidate the basic work of foreign exchange management. This year’s legislative work should be further promoted, especially the revision of the regulations on the administration of foreign exchange, further improve the balance of payments statistics, increase the research on key foreign exchange topics, and deepen the construction of “digital external control” and “safe external control”.
