Press briefing on China's economic development in 70 years

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Thank you, Mr. Liu Kun. Now I'll give the floor to Mr. Yi Gang.

Yi Gang (Governor of the People's Bank of China):

Hello, friends from the press. One week from now, we will be celebrating the 70th founding anniversary of the People's Republic of China (PRC) all over the country. Over the past 70 years, China has seen thriving development and its goal of building a moderately prosperous society is soon within reach. Over the same period of time, the financial industry has also flourished and made historic achievements, thanks to the country's reform and opening up policy and the call for high-quality development since the 18th National Congress of the Communist Party of China (CPC).

Yi Gang:

First, a modern financial market system compatible with our system of socialism with Chinese characteristics has basically taken shape. After the founding of the PRC, China quickly started building from scratch a stable and credible legal tender system. In the forty years of China's reform and opening up, the financial sector has witnessed great development and prosperity. A financial market system that covers banking, securities, insurance, funds and futures has been gradually established, allowing all kinds of financial institutions to fully compete. Now, China has over 4,500 banking and financial institutions, over 130 securities companies and 230 insurers. Their total assets have reached 300 trillion yuan, of which 268 trillion are banking assets, the largest size in the world. In addition, China's bond, stock and insurance markets all rank No. 2 worldwide. The country has also had the world's largest holding of forex reserves for many years. The holding now stands at $3.1 trillion.

Second, a financial service system that serves the real economy and emphasizes easy accessibility has been basically set up. Over the past 70 years, China has kept on rolling out various financial services and led the world in terms of the access and financial inclusion of such basic services as deposits, loans, payments, settlements, wealth management, investments, and information inquiries. In the financial market, we have basically formed sound systems for registration, custody, settlement, credit investigation and rating, and our financial infrastructure has continually improved. Since the 18th CPC National Congress, we have been carrying out supply-side structural reform to improve financing services for private, micro and small businesses. At the end of August 2019, the financial inclusion loans to micro and small businesses rose 23% year on year to 11 trillion yuan; the loan balance of private businesses expanded 6.7% year on year to 45 trillion yuan; the overall financing cost of enterprises fell by over one percentage point from the average level in 2018.

Third, a financial oversight system that can effectively safeguard financial stability has been basically established. We have always stuck to a reform approach to diffuse financial risks and improve the health of the financial system. After the 1998 Asian financial crisis, we made up our mind to reform and regroup China's large commercial banks in a market-oriented manner. We have successfully coped with the risks facing rural credit cooperatives and promoted standards for all kinds of financial business forms. Currently, the banking sector's non-performing loan ratio is 1.99%, the capital adequacy ratio is 14% and the provision coverage ratio is 180%. We have continually improved the financial legal system, risk disposal system and the financial oversight system to make our oversight more professional and effective. The rule of law has been constantly strengthened in the financial sector. Currently, the financial oversight framework operates this way: the State Council Committee for Financial Stability and Development sits at the top, complemented by the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange and local financial oversight authorities with a clear division of work. Since the 18th CPC National Congress, especially since 2018, China has seen positive results in its endeavors to prevent and diffuse financial risks. We have addressed financial risks in key areas in compliance with laws and regulations and as a result, the overall financial risks have eased and are under control, leading to positive changes in market expectations.

Fourth, an effective system of financial regulation has been basically introduced. Through all the stages of development of the PRC, financial regulation has always been there to keep the value of the renminbi stable and safeguard the wallets of the people as best as it can. Since China started the reform and opening up drive, it has kept on improving its monetary regulation framework to better develop the socialist market economy and its main focus is to push for a change from direct regulation to indirect regulation as the primary means of regulation. We have innovated and optimized our monetary policy tools, including open market operations, reserve requirement ratios, reloans and rediscounts, and carried on with market-oriented interest rate reform. Monetary policies and macro-prudential policies are our two pillars and we also place emphasis on counter-cyclical regulation.

Fifth, an open system that is global and that ensures equal competition has been basically established. Restrictions on banking, securities and insurance market access have been significantly loosened and next year foreign ownership limits will be fully scrapped. Foreign banks have so far set up 989 institutions in China and the number of foreign-funded securities companies and insurers in China are 13 and 57 respectively. The exchange rate of the renminbi is determined by market supply and demand. Since 1994, the renminbi has appreciated markedly both in nominal and real terms. Under the capital account, convertible and partially convertible items accounted for over 90%. In 2016, the renminbi was formally included in the IMF's Special Drawing Rights Basket, significantly strengthening its use in denomination, settlement, and transaction as well as its role as a reserve currency. In recent years, China has actively engaged in international exchanges and cooperation as a responsible country and helped enhance the voice and representation of developing countries in international economic and financial governance.

Yi Gang:

Looking ahead, we firmly believe that under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, new and brilliant achievements will be made in the reform, development and stability of the financial sector.Thank you.

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