SCIO briefing on China's financial statistics in H1 2021

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I have two questions. First, will green finance re-lending be the new monetary policy tool to support the decarbonization policy? Second, how is the PBC preparing to handle the external shocks and also the impact of the Fed's policy tightening in the future? Thank you.

Sun Guofeng:

I will first answer your question regarding our tools to support carbon emission reduction. To implement the policy decisions and plans made by the CPC Central Committee and the State Council on accelerating green and low-carbon development and solidly carrying out work to achieve carbon peak and neutrality goals, the PBC is now working in an orderly manner to set up tools to support carbon emission reduction in accordance with the government work report and the requirements of the State Council executive meetings. The tools will provide targeted and direct support to the development of clean energy, energy conservation, environmental protection, and carbon emission reduction technologies, and will encourage more social funds to promote carbon emission reduction. As structural monetary policy tools that can provide direct support to the real economy, our tools will provide eligible financial institutions with low-cost funds and encourage them to offer financing at preferential interest rates for key projects with significant effects in carbon emission reduction.

The tools to support carbon emission reduction are being devised under the principles of marketisation, the rule of law and internationalization, and fully demonstrate openness and transparency. The tools are feasible, computable and verifiable, and provide targeted and direct support. "Feasible" means the tools will definitely provide support to key projects with significant carbon reduction effects, including those regarding clean energy, energy conservation, environmental protection, and carbon emission reduction technologies. "Computable" means financial institutions can calculate emission cuts supported by loans, and then disclose the information for public supervision. "Verifiable" means third-party organizations will be invited to verify the authenticity of the information released by financial institutions to ensure the effectiveness of the policies.

The tools to support carbon emission reduction give full play to the role of monetary policy tools in policy proclamation, enabling financial institutions and enterprises to better understand the importance of green transition. The tools also promote a green and low-carbon lifestyle and a circular economy among the public. They encourage investment and financing from non-government sources to flow into green and low-carbon sectors to help achieve carbon peak and neutrality goals. This is my answer to your first question.

As for your second question regarding the impact of the Fed's monetary policy shift, I have just covered this when answering previous questions. We have noticed the recent discussions about the Fed's tightening monetary policy. As for the Chinese financial market, the interest rate of 10-year government bonds now stands at about 3%, lower than that of the previous period. The RMB exchange rate is floating both ways and financial markets are running smoothly. As I just said, our economy has maintained steady and sound performance. Therefore, I think the discussion about the Fed's monetary policy shift has a relatively small impact on China's monetary policies and financial markets. Next, the PBC will carry out international macro-policy coordination, giving prominence to China's domestic situation and jointly making a positive voice in stabilizing and reviving the world economy. Thank you.

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