On Saturday, a new report was released stating that China's financial sector has demonstrated its resilience amid challenges posed by external impacts and COVID-19, and that financial risks were effectively defused in 2021.

The report centered around China's proactive financial policies and summarized its major practices last year to balance financial growth and security, forestall and defuse financial risks, lower the macro leverage ratio and promote the reform of direct financing.

On the macro economy side, China has ramped up efforts to lower its macro leverage ratio to the pre-pandemic level. As one of the first countries to resume work and production, China was the only major economy that registered positive growth in 2020. The country's gross domestic product expanded 8.1% and its macro leverage ratio was 272.5% in 2021, 7.7 percentage points lower than that recorded at the end of the previous year. Its total outstanding social financing rose rapidly last year with a growth rate of 10.3%. 

Compared with other countries, China managed to maintain the smooth operation of its economy with a relatively small amount of newly-added debt, said Lu Lei, deputy administrator of the State Administration of Foreign Exchange (SAFE).

Lu, also a member of the report's drafting team, shed light on the achievements of and new tasks for China's financial sector via video link during the 2022 Tsinghua PBCSF Global Finance Forum on Saturday.

He explained that China has kept various financial risks under control, and the country's financial system boasted strong resilience when faced with external headwinds in 2021.

The country's financial sector has also been stable on the whole. Official statistics show that the non-performing loan ratio of Chinese commercial banks stood at 1.73% at the end of the fourth quarter of 2021, and their provision coverage ratio reached 196.91%. 

The report reviewed China's progress on handling high-risk small- and medium-sized financial institutions. The number of high-risk banks has decreased for six consecutive quarters from a peak of 649 in the third quarter of 2019 to 316. This number is expected to further decline to fewer than 200 by 2025, said the central bank.

In the face of a complex and challenging environment, the report suggested financial institutions strengthen their capacity to support the real economy and channel more funds into sci-tech innovation, green development initiatives and advanced manufacturing.

In the meantime, China's financial market is expected to keep pursuing opening-up and introducing rules and regulations which reach international advanced standards. The market's loss absorbing capacity also needs to be strengthened, in a bid to create a favorable financial environment for the country's efforts to ensure stability on the six fronts and security in the six areas, Lu said.

Regarding financial regulators, the report urges relevant government bodies to speed up the enactment of the law on financial stability, and calls for establishing a fund to ensure financial security and stability.

Related

Go to Forum >>0 Comment(s)