Yi Gang Comments on 10 Big Issues

iFeng: 贸易战、金融开放、金融监管…易纲释放十大重磅信号
On April 11th, at the Boao Forum for Asia in 2018, Yi Gang, Governor of the People's Bank of China, announced that many financial sectors have opened up to the outside world, and he also paid attention to virtual currencies, internationalization of the renminbi, and Sino-US trade frictions. Many hot topics responded.

I. Continue to implement a prudent monetary policy and have already prepared to tighten interest rates

Yi Gang said that at present, China is a prudent and cautious monetary policy. We have no quantitative easing or zero interest rate policy. Now the major central banks are beginning to tighten interest rates and begin to withdraw from expansion. We have been expecting such changes for a long time, so we are ready to make such changes.

Second, the future dual-track integration of the interest rate market is the direction of reform

When Yi Gang was asked if China's benchmark interest rate will change next, he said that the best way is to gradually integrate China's two interest rate tracks. "This is our direction of reform."

Yi Gang mentioned that China currently has two tracks of benchmark interest rates and market interest rates, of which the money market's interest rates are entirely determined by the market, such as government debt, corporate bond interest rates, and so on. In addition, the benchmark interest rate has also relaxed some space, deposit and loan interest rates can be slightly higher or lower than the benchmark interest rate, which is determined by commercial banks based on market conditions.

He said that the best strategy for the future is to gradually integrate the two tracks and to follow the direction of market interest rates.

Third, strive to open Shanghai Luntong in 2018

Yi Gang stated that he is striving to open Shanghai Rentong through 2018.

Yi Gang also stated that in some financial industries announced earlier, the opening measures of the service industry are also proceeding in an orderly manner. For example, previously announced restrictions on market access for open bank cards, clearing houses, and non-bank payment agencies, liberalization of foreign-funded financial service companies to implement credit rating services, and national treatment of foreign investment trust agencies The implementation of the measures has been announced as solid progress.

Fourth, not to resolve Sino-US trade frictions with the devaluation of RMB

Regarding the recent Sino-U.S. trade friction, Yi Gang stated that Sino-US trade friction is a structural issue and a long-term problem. This issue must be viewed in a rational way. China will not respond to trade disputes by devaluing the renminbi.

He said that the focus of China's monetary policy is to focus on the domestic macroeconomic situation and serve the real economy. China's exchange rate mechanism is determined by supply and demand. It is a market-determining mechanism. It operates well and will continue to operate well in the future.

He said that the world’s top two economies, the trade deficit between China and the United States, or the problem of imbalances, is a very complicated issue.

This complexity is reflected in the fact that, first of all, this imbalance is a structural problem. China is at the end of the value-added product value chain, so it is said that China’s trade surplus actually represents the surplus of East Asia for the United States.

Second, trade imbalances are a matter of macroeconomics. In the current situation, the United States has a trade deficit with China, but on the other hand, if we look at the budget, the US government’s budget deficit will also increase. The higher the budget deficit, the higher the trade deficit.

Third, when we look at investment and have infrastructure investment projects, the U.S. economy will be better. The higher the investment, the greater the current account deficit will be.

V. Six Open Policies and Principles in the Financial Sector

According to Chairman Xi Jinping’s implementation of the opening-up measures, it is not easy to be late, and it is not easy to be quick and easy. The following six points of opening up in the financial sector must be implemented in the coming months.

First, the restrictions on foreign ownership of banks and financial asset management companies have been lifted. Domestic and foreign investment are treated equally and foreign banks are allowed to set up branches and sub-banks in the territory of China.

Second, the upper limit of foreign ownership ratios of securities companies, fund management companies, futures companies, and personal insurance companies is relaxed to 51%, and no restrictions will be imposed after three years.

Third, there is no longer a requirement for domestic shareholders of joint-venture securities companies to have at least one securities company.

Fourth, in order to further improve the mechanism for interconnection between the mainland and Hong Kong stock markets, the daily quota for interconnection will be expanded by four times from May 1 this year, which means that Shanghai Stock Exchange and Hong Kong Stock Exchange will be adjusted by 13 billion yuan each year. To 52 billion.

Fifth, allow qualified foreign investors to come to China to run insurance agency business and insurance assessment business.

Sixth, let go of the scope of operations of insurance foreign-funded economic companies and be consistent with Chinese-funded institutions.

Yi Gang said that the above measures will be implemented before June 30 this year.

At the same time, Yi Gang also stated that the opening up of the financial industry to the outside world will be greatly liberalized and international competitiveness will be enhanced. The next step in the opening up of the financial industry will follow the following three principles.

First, pre-admission national treatment + negative list management.

Second, the reform of the opening up of the financial industry and the formation of exchange rate mechanisms should be coordinated with the reform process of capital account convertibility and jointly promoted.

Third, while opening up, we must attach great importance to preventing financial risks and make our financial regulatory capabilities match the degree of openness.

VI. The supervision of the central bank’s virtual currency continues to be closely monitored

On the Boao Forum, Yi Gang’s exclusive response to Tencent’s “First Line” stated that the regulation of virtual currency would be very strict.

Yi Gang said that virtual currency has less service to the real economy, there are some speculations, there are even some money laundering, and other acts. So in China we have been cautious about virtual currency.

However, Yi Gang also stated that, in fact, for the world’s research on digital currency, China’s research is on the front, and the central bank is also studying how the digital currency can serve the real economy in the best possible form in the best possible form. The development can avoid some possible negative impacts, making digital currency better able to serve the economy. This includes blockchain technology as well as financial technology.

Yi Gang said that as a whole, the regulation of virtual currency is very strict. At the same time, the central bank is also studying how to use the digital currency as its positive energy and better serve the real economy.

7. The internationalization of the renminbi is a market-driven process

Regarding the issue of RMB internationalization, Yi Gang stated that RMB internationalization is a market-driven process.

Yi Gang stated that if enterprises and financial institutions, as well as individuals, have such needs, the internationalization of the renminbi can indeed save costs and can save the cost of currency mismatches. “We are happy to hedge against the risk of currency misalignment, but it is mainly driven by the market. We want to make the competition between the renminbi, the US dollar, the euro, and the Japanese yen balance. It is most convenient for companies to choose which currency to use freely. Which currency to use."

Eight, Yi Gang responds to interest rate trends: currently in a more modest space

When Yi Gang, the Governor of the Central Bank, responded to Tencent’s “First Line” question regarding the next stage of the Chinese interest rate market, including whether the mortgage interest rate will continue to rise, he replied that they have two criteria for judgement. First, they have seen the emergence of the real economy. What kind of influence is the financial support for the real economy? Second, we must consider what we expect to be in the future. "These two aspects are considered. We are now in a more modest range."

He mentioned that China’s monetary policy has been very stable. When many developed countries have zero interest rates, China’s monetary policy and interest rate policy are also quite robust. So when other countries start to raise interest rates after the currency, such as the US has raised interest rates six times, the yield curve of the renminbi is still higher than the yield curve of the US dollar. "I think the current pattern of monetary policy and interest rate spread is generally stable, and it is also conducive to China's economic development."

IX. Consider how the market for securitisation of real estate assets can be developed

The issue of securitisation of real estate assets is a somewhat more complicated issue. Our real estate has not been done. A large part of this is because of its basic assets. It is not the same as the real estate in developed markets. The basic assets of people are to be sold. After asset securitization, these assets are actually sold to the market. This will make the bank's capital adequacy ratio and its loans fall. However, there are times when the assets of real estate in China are not willing to sell off. Therefore, there are some difficulties and considerations in the development process. From the policy point of view, we are also considering how to more effectively enable the market of Riss asset securitization to develop.

X. What mode and how to coordinate financial supervision?

I think that the current regulatory framework in China must strengthen supervision, but the basic framework of our current supervision is still a framework for the supervision of separate industries. The duties of the regulatory framework for separation of occupations are clear, but in the past years of experience, we must pay special attention to the spread of cross-market, cross-product, and cross-institutional risks. For example, we are considering large-scale capital management and guiding opinions in the future. To be introduced, in fact, we have made the asset management business, whether you are a bank or a securities company, or an insurance company, should compete under the same rule. To minimize regulatory arbitrage, this is our thinking.

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