We wonder how the epidemic is affecting China's deleveraging policy? Will it cause more non-performing loans? How will it affect the fiscal deficit? Thank you.
Thank you for your questions. First, due to the combined action of various policies and measures in recent years, China's macro leverage ratio remains basically stable, and the overall macro leverage ratio has been maintained at about 250% for almost ten quarters. Second, the move of structural deleveraging has achieved obvious effects. The level of corporate leverage ratio has been declining. Compared with the high points in 2017, it has decreased by 5 to 6 percentage points in the past two years. The growth of the levels of leverage ratios of the household sector and the government sector is also exhibiting a declining trend. Third, China has enough policy tools to cope with the downward pressure on its economy. Among the major economies in the world, China is one of the few countries that still adopts a normalized monetary policy. Fourth, when we implement monetary policie, we need to comprehensively consider multiple factors of internal and external balances such as economic growth, leverage ratios, inflation expectations, and exchange rates. And in the context of the epidemic and the downward pressure on the economy, maintaining economic growth has now become even more important. The People's Bank of China will carefully study and evaluate the monetary policy, ensure that it stays at an optimal level, and balance the relationship between our monetary policy's ability to support economic growth and to stabilize leverage. Thank you.
I want to add to this. This year's fiscal deficit arrangements have taken into account some uncertain factors. Judging from the current situation, we believe the expenditure for epidemic prevention and control is guaranteed, and we are confident that we will accomplish this year's fiscal targets. Thank you.
The reporter also asked if the epidemic would have any impact on the non-performing loan (NPL) ratio of small and micro enterprises. In 2019, the NPL ratio of inclusive loans to small and micro enterprises was 3.22%, a decrease of nearly 1 percentage point from 2018. Objectively speaking, the epidemic outbreak has some impact on small and micro enterprises, especially those in sectors such as accommodation, tourism, and catering. But in general, first, the total affected amount will not be too large. The hard-hit regions like Wuhan in Hubei province may be affected a little more. Other areas are affected by factors related to the Spring Festival holiday and epidemic prevention and control measures. We project that the NPL ratio will rise. But from the perspective of the operation of the entire financial system, we can say things will be fine given that last year we resolved non-performing assets worth 2.3 trillion yuan, and the proportion of small and micro enterprises' non-performing assets was relatively small. In addition, the provision coverage ratio in China's banking system has reached over 180%, so there are sufficient resources to cope with possible increase in the NPL ratio. Everyone should look at the relationship between the economy and the financial real economy in the long run. You should see that this epidemic will only be a temporary event. From the perspective of China's economic resilience and ability to absorb short-term impacts, its influence will soon pass and is unlikely to heavily impact China's financial system. Thank you.