On April 16, 2022, the China Financial Policy Report 2022 was officially released at the 2022 Tsinghua PBCSF Global Finance Forum. The report reviews the policy practices, and prospects the financial outlook and development trend. Renowned scholars and industry experts joined the session.

Adhering to the principle of "communicating China’s financial policies with the world", the China Financial Policy Report 2022 was jointly prepared by the Tsinghua PBCSF and the Institute of Financial Policy of the Chinese Academy of Social Sciences, aiming to comprehensively and accurately reflect the major themes and policy developments in China's financial policy. 

Lu Lei, Joint Editor of the China Financial Policy Report 2022, Deputy Director of the State Administration of Foreign Exchange, member of the Party Group, introduced the main contents of the report online at the meeting. He focused on how finance should play a key and active role in overall development and security, and discusses the connotation of the theme of "China's Financial Policies Actively Responding to Various Risks and Challenges". 

Xing Wei, Consultant of the China Financial Policy Report, Secretary of the Party Committee of China Banking Association, and Guan Tao, Senior Expert of the Program for China Financial Policy Report, Global Chief Economist of BOC Securities, made keynote speeches.

The report release was hosted by He Haifeng, executive editor of the China Financial Policy Report 2022, Chief Economist of Guotai Junan and Director of Institute for Policy Research of Guotai Junan Securities.

He Haifeng hosted the session

Remarkable achievements in forestalling financial risks

The China Financial Policy Report 2022 pointed out that, China has made important progress in addressing financial risks during 2021. In the absence of a significant credit contraction, the equity and debt financing structure continued to be optimized, and the leverage ratio was gradually restored to the pre-pandemic level driven by high-quality economic development. The financial industry was operating in a stable manner, and risks were generally restrained. In the key areas, disposal of high-risk small and medium-sized financial institutions, shadow banking, asset management industry, local government debt and other risks have been effectively managed and controlled, and the resilience of the financial system has been further improved.

New changes in the situation put forward new requirements for financial development

The Report pointed out that judging from the changes in the internal and external situation since last year, it is critical to pay attention to various risks and challenges. From the perspective of international economy, global inflation has exceeded expectations; the conflict between Russia and Ukraine has caused global energy and food prices to surge and remain volatile; and the Federal Reserve may raise interest rates rapidly and shrink its balance sheet significantly. From the perspective of domestic economy, Omicron has increased the pressure of imported case in China, while containing financial risk during the process of economic transformation cannot be ignored.

Lu Lei emphasized that in the face of complex and ever-changing new situations and challenges, financial institutions should better manage risks and allocate resources across time, to supplement and counter-cyclically stabilize the real economy. 

Financial markets should improve competitiveness and capability to absorb risks. Financial management departments should buttress the bottom line and ensure the stable and healthy operation of the financial system. Meanwhile, we should speed up the implementation of the Financial Stability Law, as well as the establishment of the fund for ensuring financial stability in line with economic conditions in China, and form an efficient financial safety net that complements and cooperates with the existing deposit insurance funds and industry guarantee funds.

Lu Lei introduced the main contents of the report

Promote the improvement of management ability and theoretical innovation in practice

The Report 2022 pointed out that, we need to build a scientific macro-guidance + sensitive micro-response "two-in-one" economic and financial management system with expectation management as the core, hence forming a Chinese solutions for contemporary economic and financial management. On the other hand, we should focus on promoting innovative theories and building a solid foundation for monetary and financial management. 

Lu Lei emphasized that it is necessary to form a financial method framework that can keep up with changes in the economic structure based on China financial system. At the same time, we must make good use of our financial management experience in successfully dealing with macro and micro challenges, including using two direct policy tools for alleviating financing difficulties for micro and small enterprises, stabilizing the market, and supporting enterprises to use the international and domestic markets and resources for better development in compliance with laws and regulations.

After the release of the China Financial Policy Report 2022, Xing Wei and Guan Tao successively delivered speeches.

Xing Wei delivered the speech

Banking industry promotes high-quality economic development

Xing Wei pointed out that in recent years, the banking industry has maintained a stable development trend in the context of deepening financial supply-side reform. However, in the process of supporting high-quality economic development, it has also encountered a series of problems including difficulties in connecting with specialized and new enterprises, insufficient transformation in digitalization, and urgent need for service innovation. 

In response to new problems and new challenges, Xing Wei suggested that: 1. banks should focus on key economic areas and weak spots to provide financial services, making every effort to maintain the stability of the macroeconomic situations. Including focusing on key technologies, weak areas, and digital-industry integration, at the same time, keeping the balance between preventing risks and promoting development with high standards, improving market adaptability and sensitivity, and optimizing relevant systems and mechanisms; 2. financial management departments can issue targeted policy guidelines to motivate the internal momentum of the banking industry to support high-quality development. Including unifying financial standards, strengthening financial incentive mechanisms, continuously increasing efforts to dispose of non-performing assets, and establishing a fund for financial stability; 3 relevant functional departments should further improve the basic supporting facilities to provide assistance for the banking industry. Including the establishment of an information sharing platform, the establishment of professional technical evaluation and trading institutions, and the improvement of risk compensation mechanisms. 

Xing Wei proposed that the Banking Association will continue to focus on the functions of "self-discipline, rights protection, coordination, and service", empower the industry by building technology platforms, strengthening talent training, and strengthening investigation and research, so as to help the industry play a role in serving the high-quality development of the economy.

Guan Tao delivered the speech

Review and policy prospect on exchange rate and balance of payments

Guan Tao reviewed the exchange rate and balance of payments policies and situation, and pointed out that the RMB appreciation in 2021 against the trend was mainly affected by supply and demand. China has also introduced a series of policies including promoting the reform of exchange rate marketization and improving the liberalization of cross-border trade and investment. 

Regarding the factors affecting the RMB exchange rate and cross-border capital flows in the future, Guan Tao believes that the main external factor is the tightening policy of the Federal Reserve. He respectively discussed the possible changes in the RMB exchange rate under the four different scenarios of the Fed raising interest rates and shrinking balance sheet. China has passed the first stage of the Fed's moderate tightening smoothly. In the future, we should still pay close attention and be vigilant to prevent nonlinear changes. 

Guan Tao believes that seven aspects should be notified in 2022: 1. continue to deepen the reform of exchange rate marketization, improve the exchange rate system, and strengthen expectation management. 2. continue to prudently promote the internationalization of the RMB. 3. containing external shock risks, and strengthen macro-prudential management on the external market. 4. deepen the reform and opening up in the field of foreign exchange. 5. improve the micro-supervision of the foreign exchange market, and improve the way of verifying the authenticity of foreign exchange business. 6. improve the management of foreign exchange reserves. 7. build a consolidate foreign exchange administration and advance the revision of the Regulations on Foreign Exchange Administration, further improve the balance of payments statistics, promote research on key foreign exchange topics, and deepen the construction of "digital external management" and "safety external management".