SCIO briefing on maintaining financial market stability during COVID-19 epidemic
0 Comment(s)
Print
E-mail SCIO, March 25, 2020
MNI:
I have two questions. Recently six major central banks around the world promised to take coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements. Will China's central bank participate in this action or in similar such actions of global coordination? My second question is for the China Banking and Insurance Regulatory Commission, how will financial institutions support key businesses in the industrial chain and provide liquidity for enterprises in the lower reaches of the chain? What specific measures will be taken? Thank you.
Chen Yulu:
Thank you for the question. President Xi Jinping has stressed in multiple occasions that humankind is a community with a shared future. Amid the spread of the epidemic worldwide, the global financial market is jolted, and stock markets of Europe, the U.S. and many emerging economies have plummeted. The epidemic has huge impact on economies and finance. The COVID-19 disease itself and its impact on the global economy are challenges facing all countries across the world. Though China is yet to clinch the final victory in its combat against the epidemic, it is overcoming all difficulties to provide as much help as it can to the international community.
We are now watching the epidemic reaching new levels globally. All countries need to immediately step up coordination on macro policies, including public health, trade, financial and monetary policies, so that we can work together to make the international response more coordinated and effective.
As to your question of whether the People's Bank of China will participate in international policy coordination, since the outbreak of the epidemic, the People's Bank of China has strengthened policy coordination with international organizations and other major central banks through multilateral, bilateral and regional channels. Governor Yi Gang has maintained communication with the Managing Director of the IMF Kristalina Georgieva, General Manager of the BIS Agustín Carstens, and Chair of the U.S. Federal Reserve Jerome H. Powell, exchanging views with them on how to effectively cope with this epidemic with monetary and financial policies. The People's Bank of China also sends updates on the epidemic's impact and its response to the central banks of other G20 members and major international financial organizations. These communications, updates and exchanges are well received by the international community.
We have noticed that in response to the spread of the epidemic worldwide, many countries have taken similar policies to maintain the stability of their financial markets. G20 is a major platform for international coordination of macro-economic policies. It played a historical role in coordinating and promoting international economic revival in the wake of the 2008 financial crisis. The IMF is at the core of the global financial security network, shouldering the responsibility of safeguarding the stability of international financial markets. We support the G20, IFM and other international multilateral platforms and organizations to continue to play a positive role in policy coordination and crisis relief, so that we can bring this global coronavirus outbreak under control and maintain the stability of the global economy and financial markets. Thank you.
Zhou Liang:
More of the industrial chains are now back on track. Since the advent of industrialization, especially post-industrialization, the structures of many industries have undergone tremendous changes. It is now nearly impossible for a manufacturer to produce a complete product on its own. A reporter raised a question on the industrial chain, which I think is at the core of resumption of work and production. A ccore enterprise is a linchpin in the industrial chain, and is connected with a great number of small and medium-sized businesses, especially small and micro ones, in the upper and lower reaches of the industrial chain. We have done a lot of work in this aspect recently. For instance, an automaker has business ties with more than 500 companies in the upper and lower reaches of the automobile industrial chain. We encouraged banks to provide it with required services. The industrial chain covers products, marketing and technology. Once this key enterprise is back in normal operation, it can make payments as usual to its business partners in the upper and lower reaches of the industrial chain. With bank loans of over RMB 70 billion, this automaker soon began operating again. What would it do with this money? It needed to make advance payments to its partners in the upper and lower reaches of the industrial chain, which are private companies and small and micro businesses. As this automaker now stands in a pivotal position in this chain, we must prevent it from bullying lesser players. Key enterprises cannot exploit their advantaged position to infringe on the interests of their smaller peers in the industrial chain. We have ratcheted up supervision to ensure that this automaker will not impair small and micro businesses when making advance payments to them. Meanwhile, we supported this automaker to use receivables, warehouse receipts and inventory for pledge financing. What's more, banking institutions employ big data and blockchain technologies to provide better financing services to small and micro businesses along the industrial chain.
The question the reporter raised may be more about support for banking and insurance industries, as industrial chain financing is only one example of financial support for resumption of production. The point I want to make is that China Banking and Insurance Regulatory Commission and China Securities Regulatory Commission have unveiled a series of policies to assist the development of the real economy. They include: first, supporting enterprises involved in epidemic prevention and control to resume and expand production; second, making flexible arrangements for payment of consumer debts such as credit card, automobile, and housing loans for those who cannot settle their liabilities amid the epidemic; third, tiding qualified enterprises over through temporary difficulties by allowing them deferred repayment of capital and interest over a period of time; fourth, increasing credit support for private, small and micro businesses, in particular reducing their financing costs; fifth, boosting supply chain finance to ease the liquidity pressure on small and micro businesses along the industrial chain; sixth, providing targeted support in accordance with national strategies to key projects that can boost macro-economic and regional development. So far, banking institutions have unleashed more than RMB 1.8 trillion credit for epidemic prevention and control. Since January 25 about 20 percent of small and micro businesses have deferred loan repayments. In the first two months of this year, an additional RMB 250 billion in loans went to the manufacturing sector, a marked increase over the same period last year. Meanwhile, banks and insurance companies have made RMB 2.7 billion worth of donations in cash and kind to epidemic prevention and control at home, and provided assistance to about 20 countries and regions hit hard by the outbreak. For instance, the Bank of China purchased 2.25 million face masks, gloves, protective suits and other materials, and shipped them to a dozen countries and regions across the world. The China Construction Bank and Industrial and Commercial Bank of China also did their part to help.
Under the leadership of the CPC Central Committee, with Xi Jinping at the core, China has made heartening progress in epidemic prevention and control, with work and production back on track in an orderly manner. Since the outbreak of the noval coronavirus, China has made all efforts to prevent suspension of financial services. To this end, staff members of financial institutions stuck to their posts, and Party members lead by example. At present, in all Chinese regions except Hubei, as many as 95 percent of bank branches have reopened. This figure is 97 percent for insurance company outlets. Highly flexible financial services are available both online and offline. A recent survey we did finds that the activity of corporate accounts has evidently increased, with the flow of funds between enterprises and capital turnover of enterprises both accelerating. In our samples of small and micro enterprises, their account activity rate increased by 29 percentage points from the second half of February to early March, an indicator of recovery of economic activities.
The next step for the China Banking and Insurance Regulatory Commission and China Securities Regulatory Commission will continue to provide full financial support to epidemic prevention and control under the unified plan of the CPC Central Committee and State Council. Meanwhile, we will work to improve the quality and efficiency of financial services for the real economy, better serving small, micro and private enterprises, especially private manufacturers, by increasing credit to them, reducing their borrowing costs, improving the quality of financial services, and weighing loans toward first-time borrowers. A key mission for China this year is to complete the construction of a moderately prosperous society in all respects. To this end, we have increased financial support for poverty alleviation, and made strenuous efforts to implement various plans with the emphasis on fulfilling goals, solving problems and meeting demands. Despite all these endeavors, our work is not free of flaws. Some enterprises may have complaints about financing obstacles and costs. We will do our best to improve work efficiency and quality to address concerns of businesses and the general public. Thank you.
Go to Forum >>0 Comment(s)