SCIO briefing on work of supporting the development of micro, small and medium-sized enterprises and assisting self-employed business owners

The State Council Information Office held a press conference on Feb. 27 in Beijing to introduce the work supporting the development of micro, small and medium-sized enterprises and assisting self-employed business owners. February 28, 2020


I have two questions. First, major foreign financial institutions, such as the Federal Reserve, have expressed their concerns about the impact that the epidemic will have on the economy, as well as the rapid increase of cases abroad. What new monetary policies will the People's Bank of China introduce? Will the authorities further lower the interest rate? The second question is about the job market stabilization. Some companies would like to apply for some help to stabilize employment. Are there any measures in terms of the stabilization of wages? What are they? Thank you.

Liu Guoqiang:

Thank you. International organizations are worried about the negative impact of the epidemic on the global economy, and I am also very worried, and this worry has become a fact. The epidemic has had a negative impact on the global economy. Not only on China's economy, but also on that of other countries, as cases have been reported in many other countries. For example, trade, industrial supply chains, and financial markets have all been affected. However, most people believe that such impact is short-term, and it will neither change the fundamentals [of China's economic growth] nor its long-term trends.

What should China do to mitigate the impact on the economy inflicted by the epidemic? General Secretary Xi Jinping said we should focus on running our own affairs well. China is the second largest economy in the world, and its economic growth plays an important role in driving the world economy. Therefore, the sound growth of the Chinese economy is essential for a stable world economy. How can the forward momentum of the Chinese economy be maintained? Of course, we can make efforts in many aspects. In terms of monetary policy, on the one hand, we must adhere to a prudent monetary policy. China is one of the few countries that maintain a normal monetary policy. Many countries have adopted unconventional monetary policies, such as zero interest rate. But China is still far from adopting those unconventional monetary policies. Therefore, China has ample policy space and can cope with various challenges in the future. We must cherish and maintain this situation.

On the other hand, it is also necessary to keep the monetary policy that is flexible and appropriate and intensify counter-cyclical adjustments scientifically and steadily in accordance with the current economic situation. I mentioned some measures just now, such as the special re-lending programs totaling 300 billion yuan and increasing the re-lending and re-discount quotas by 500 billion yuan. These are structural monetary policy tools, but they also have an impact on the monetary aggregate. In terms of the monetary aggregate, we have maintained reasonably sufficient liquidity via standing lending facilities (SLF), medium-term lending facilities (MLF), open market operations, and targeted reserve requirement ratios (RRR) cut for inclusive finance. Another dimension is the price of funds. In terms of interest rates, the central bank has introduced the loan prime rate (LPR) as the only benchmark rate for banks' lending. Since the introduction of LPR, there has been an apparent downward trend in interest rates. Not only does the LPR itself fall, but it also drives the lowering of credit rates. Currently, there is still room for rates to decline. So we will continue to reform and improve the relevant mechanisms and tap the potential of the further declining LPR. In addition, we need to improve the transmission mechanism of monetary policy. The reform of LPR has been carried out smoothly over the previous period. At present, new loans are priced with reference to the LPR instead of the traditional benchmark lending rate.

You may have noticed that all the programs and measures we have introduced, including the 300 billion and 500 billion lending programs as well as the new lending by banks to enterprises, are benchmarked against the market-oriented LPR instead of the traditional benchmark interest rate on loans. That means a change of benchmark for the price of new loans. Another move will be converting the pricing benchmark of the existing loans to the LPR. Our original plan was to start the conversion on March 1. Will this plan change now? We don't think so. After careful research and investigation, we decide to continue to advance the plan as scheduled, which will contribute to strengthening the market's role in setting interest rates and guiding the interest rates to continue decrease. Of course, we must attach importance to the epidemic prevention and control, and promote online operations, such as mobile banking and online banking. For businesses that require on-site handling, we will guide commercial banks to operate based on appointments and make good use of automatic machines. Commercial banks are all making their respective plans, so the timetable is unchanged, but the progress may be at a different pace for different banks. Generally, I think it will be completed on schedule. Thank you.

Hu Kaihong:

In regard to the employment issue mentioned by the reporter just now, we will hold a press conference on that issue tomorrow morning. You are welcome to attend. Today's conference is hereby concluded. Thank you, speakers. Thank you all.

Translated and edited by Wang Yiming, Fan Junmei, Wang Yanfang, Zhu Bochen, Duan Yaying, Wu Jin, Zhang Jiaqi, Zhang Rui, Qin Qi, Xiang Bin, Li Huiru, He Shan, Yang Xi, Gong Yingchun, Huang Shan, Wang Qian, Zhou Jing, Zhang Junmian, Guo Xiaohong, Li Xiao, Wang Wei, Wang Yanfang, Jay Birbeck, Laura Zheng, David Ball, Geoffrey Murray. In case of any dispute over a discrepancy, the Chinese version is deemed to prevail.

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