Central Bank Governor Yi Gang: There is no timetable for the launch of digital currency (with full text of the speech)

On September 24th, the press center to celebrate the 70th anniversary of the founding of the People's Republic of China held a series of press conferences to review the historic achievements and historic changes that have taken place in China over the past 70 years. Yi Gang, president of the People's Bank of China, attended the conference and delivered a speech, and responded to questions from reporters about digital currency and whether to cut interest rates.

In the speech, Yi Gang, the governor of the central bank, said that China has basically built a modern financial market system that is compatible with socialism with Chinese characteristics. At present, we have more than 4,500 banking financial institutions, more than 130 securities companies and 230 insurance companies. The total assets of the financial industry are 300 trillion yuan, including 268 trillion in the banking industry, ranking first in the world. In addition, the bond, stock, and insurance markets have also become the world's second largest market. The balance of foreign exchange reserves is 3.1 trillion US dollars, ranking first in the world for many years. .

In response to a reporter's question about the central bank's digital currency, Yi Gang summarized four points that the Chinese central bank's digital currency needs to pay attention to:

1. The People's Bank of China has made positive progress in digital currency research and development, and plans to combine central bank digital currency and electronic payment instruments.

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2. The goal of the central bank's digital currency is to replace a portion of M0 (cash) rather than to replace M1 or broad money M2.

3. The central bank's digital currency adopts a two-tier operating system of central banks and commercial banks, which does not change the current monetary supply path and system, and fully mobilizes the enthusiasm of the market.

4. The central bank's digital currency launch currently has no timetable, and there will be a series of research, testing, pilot, evaluation and risk prevention processes that need to be carried out. The central bank's digital currency will adhere to centralized management. It does not presuppose technical routes in research and development. It can compete in the market for fair competition. It can consider blockchain technology or evolve on the basis of existing electronic payments. New technologies fully mobilize the enthusiasm and creativity of the market.

At the same time, under the background that the monetary policies of the major global economies are tending to be loose, Yi Gang responded to reporters' questions about whether the central bank will cut interest rates.

Yi Gang said that China's monetary policy mainly considers the domestic economic situation and price trends to carry out pre-adjustment and fine-tuning. China's economy is still in a reasonable range, and prices are also in a relatively moderate range. In the transformation and upgrading, we encountered some structural problems, mainly through supply-side structural reforms.

A comprehensive analysis of China's domestic situation and international background, we believe that China's monetary policy should maintain a fixed force and adhere to a stable orientation. It is necessary to stabilize the current situation, that is to say, to strengthen the counter-cyclical adjustment, and to maintain the growth rate of our broad money M2 and social financing scale and the nominal GDP growth rate to be roughly equal and roughly matched, and resolutely do not engage in “big flood irrigation”. At the same time, we must also pay attention to maintaining the stability of our leverage, so that the debt level of the entire society is at a sustainable level. At the same time, we must also consider the long-term, that is, we must increase the intensity of structural adjustment, make great efforts to clear the transmission mechanism of monetary policy, reduce the financing cost of enterprises and promote the high-quality development of the economy.

The following is the full text of the Yi Ling speech:

Hello everyone! In another week, we will celebrate the 70th anniversary of the new China. In the past 70 years, our great motherland has appreciated the prosperity and will soon build a well-off society. The financial industry is also thriving. With the reform and opening up of the country and the promotion of high-quality development since the 18th National Congress, it has made historic achievements.

First, a modern financial market system that is compatible with socialism with Chinese characteristics has been basically established. After the founding of New China, we started from scratch and quickly established a stable and credible legal currency system. In the 40 years of reform and opening up, the financial industry has ushered in a period of great development and prosperity, and gradually formed a financial market system with a complete range and full competition in the fields of banking, securities, insurance, funds, and futures. At present, we have more than 4,500 banking financial institutions, more than 130 securities companies and 230 insurance companies. The total assets of the financial industry are 300 trillion yuan, including 268 trillion in the banking industry, ranking first in the world. In addition, the bond, stock, and insurance markets have also become the world's second largest market. The balance of foreign exchange reserves is 3.1 trillion US dollars, ranking first in the world for many years.

The second is to basically establish a financial service system that aims to serve the real economy and facilitate the people and the people. Since the founding of New China 70 years ago, China's financial services have been continuously enriched, and the convenience and inclusiveness of basic financial services such as deposit loans, payment and settlement, wealth management investment, and information inquiry have been among the highest in the world. The registration, custody, clearing, settlement, credit reporting and rating systems of the financial market are basically sound, and the financial infrastructure is constantly improving. Since the 18th National Congress of the Communist Party of China, we have adhered to the structural reform of service supply side as the main line, and continue to improve the financing services for private and small and micro enterprises. At the end of August 2019, the balance of small and micro enterprise loans of Pratt & Whitney Financial was 11 trillion yuan, up 23% year-on-year; the balance of private enterprise loans was 45 trillion yuan, up 6.7% year-on-year, and the comprehensive financing cost of enterprises fell more than the average of 2018. 1 percentage point.

The third is to basically establish a financial supervision system that effectively maintains financial stability. We insist on resolving financial risks in a reformed manner and continuously improve the health of the financial system. After the Asian financial crisis in 1998, we resolutely implemented market-oriented reform and restructuring of large-scale commercial banks, effectively disposed of the risks of rural credit cooperatives, and promoted the development of various types of financial formats. At present, the banking industry's NPL ratio is 1.99%, the capital adequacy ratio is 14%, and the provision coverage ratio is 180%. We have continuously improved the construction of the financial legal system and risk disposal system, continuously optimized the financial supervision system, and improved the professionalism and effectiveness of financial supervision. The construction of the financial rule of law is constantly improving. At present, the Financial Supervision and Development Committee of the State Council has formed a financial supervision framework for coordinating the overall situation, one line, two sessions, one bureau and local division of labor. Since the 18th National Congress of the Communist Party of China, especially since 2018, it has achieved positive results in preventing and resolving financial risks. The financial risks in key areas have been safely handled according to laws and regulations. Financial risks have shown a convergent and controllable situation. Positive change.

Fourth, an effective financial regulation system has basically been formed. In the different historical stages of the development of New China, financial regulation has always strived to maintain the stability of the value of the renminbi and protect the money bags of ordinary people. Since the reform and opening up, we have continuously improved the regulatory framework for monetary policy, adapted to the needs of the socialist market economy, and focused on promoting the transformation of the regulatory mechanism from direct regulation to indirect regulation. Innovate and improve the open market operations, deposit reserve ratio, refinancing, rediscounting and other monetary policy tools, and continue to promote interest rate marketization reform. Establish a dual-pillar regulation framework for monetary policy and macro-prudential policy, focusing on counter-cyclical adjustment.

Fifth, it basically established a system of opening up to the world and equal competition. At present, the market access of banks, securities and insurance industry has been greatly liberalized, and the stock ratio limit will be fully liberalized next year. At present, there are 989 foreign-funded banks in China, 13 foreign-funded securities companies, and 57 foreign-invested insurance companies. The RMB exchange rate is mainly determined by market supply and demand. Since 1994, the RMB nominal effective exchange rate and the real effective exchange rate have all appreciated significantly. More than 90% of the capital account convertible and partially convertible items. In 2016, the RMB officially joined the International Monetary Fund's special drawing rights currency basket, and the RMB pricing, trading and reserve functions have been significantly enhanced. In recent years, China has played a responsible role, actively participated in international exchanges and cooperation, and enhanced the voice and representation of developing countries in international economic and financial governance.

The reporter's question and answer session:

Phoenix Satellite TV reporter: I would like to ask President Yi Gang, we are concerned that the European Central Bank has restarted QE (quantitative easing) recently, and the Federal Reserve has also started the second interest rate cut during the year. The monetary policies of major global economies are tending to be loose, considering the current In the domestic economic situation, is it necessary for China to follow up on interest rate cuts? Will the monetary economic orientation be adjusted?

Yi Gang: Thanks to the reporters for their questions. As you said, the central banks of the United States, the European Central Bank and the Bank of Japan, as well as many developing countries, have recently adopted a monetary policy orientation, one is to cut interest rates, and the other is to restart QE. In this context, what is the orientation of the Chinese currency? As we all know, China is a large-scale economy. Our monetary policy is mainly to serve the domestic economy. When deciding on monetary policy, we also mainly consider the domestic economic situation and price trends to carry out pre-adjustment and fine-tuning. China's economy is still in a reasonable range, and prices are also in a relatively moderate range. In the transformation and upgrading, we encountered some structural problems, mainly through supply-side structural reforms.

A comprehensive analysis of China's domestic situation and international background, we believe that China's monetary policy should maintain a fixed force and adhere to a stable orientation. It is necessary to stabilize the current situation, that is to say, to strengthen the counter-cyclical adjustment, and to maintain the growth rate of our broad money M2 and social financing scale and the nominal GDP growth rate to be roughly equal and roughly matched, and resolutely do not engage in “big flood irrigation”.

At the same time, we must also pay attention to maintaining the stability of our leverage, so that the debt level of the entire society is at a sustainable level. At the same time, we must also consider the long-term, that is, we must increase the intensity of structural adjustment, make great efforts to clear the transmission mechanism of monetary policy, reduce the financing cost of enterprises and promote the high-quality development of the economy.

If you want to look at the global, including the monetary policy of developed countries in the United States, Europe and Japan, and the monetary policy of developing countries in the next few years, I have such a judgment, that is, look forward, in a few years, if which country In particular, which major economy still maintains a normal monetary policy, such an economy should be the highlight of the global economy and should be the place envied by the market. Thank you. Japanese Economic Journalist: Looking back 70 years, with the development of the economy, the circulation of the renminbi has increased substantially, and the level of internationalization has also greatly improved. In recent years, the People’s Bank of China has assisted the digital currency, and there are some speculations in the world. The People's Bank of China will issue digital currency soon. Is there any specific plan for issuing digital currency? Yi Gang: Regarding digital currency, I would like to say a few points:

First, the People's Bank of China has been studying digital currency since 2014. We have a digital currency research institute with a dedicated team and we have made positive progress. We combine the central bank's digital currency with electronic payment instruments, so it's called a package of digital money and electronic payments.

Second, what are the goals of digital money and electronic payments in the future? The goal is to replace a part of M0, that is to say to replace a part of cash, it is not to replace M1 or broad money M2.

Third, the future framework of our digital currency is a two-tier operating system of central banks and commercial banks. It does not change the current path and system of money supply, thus fully mobilizing the enthusiasm of the market.

Fourth, we will adhere to centralized management, do not presuppose technical routes in research and development, and can compete in the market for fair competition. We can consider blockchain technology or evolve on the basis of existing electronic payments. The new technology fully mobilizes the enthusiasm and creativity of the market, and we have also established a mechanism compatible with the incentives of market institutions. As for when you can ask for it, we don’t have a timetable. I think there will be a series of research, testing, piloting, evaluation and risk prevention, especially if digital currency is used cross-border, there is anti-money laundering, Anti-terrorism financing, anti-tax havens and a series of regulatory requirements such as “know your customers”.

Author: Yi Gang

Source: Chain

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