📈From property to renminbi: what top regulators have to say about trending financial topics in China
Observations from senior officials at probably the most influential annual financial forum in China
"When you see a person of virtue and capability, you should think of emulating and equaling the person; when you see a person of low caliber, you should reflect on your own weak points."Â
——Confucius (an ancient Chinese philosopher)
Few places are closer to the center of China's financial policymaking than Beijing Financial Street. The one-square-kilometer block located inside the city's innermost 2nd Ring Road is home to the headquarters of regulatory agencies, major lenders, big-name investment banks, et cetera.
As the world has been suffering from financial volatility this year, a once-a-year forum held here from Monday to Wednesday offers a window for global observers to look into China's policy response and the latest market trends.
At the opening session of the Annual Conference of Financial Street Forum 2022, heads of China's financial regulatory bodies including the central bank governor delivered speeches.
The following are what they said about hot issues in the financial fields from the real estate sector in hardship to the softened renminbi and continued opening up.
PROPERTY SECTOR
Backgrounder: While China's once-overheated housing sector has cooled down over the past years, concerns are on the rise as a number of high-profile developers have run heavily into debt and the whole sector is in the middle of a painful adjustment. There have been appeals for policy support as the sector is linked to a lot of upstream and downstream industries and its healthy development is of great significance to the overall economy.
"We pay close attention to the difficulties and challenges facing the real estate sector,"Â Yi Huiman, chairman of the China Securities Regulatory Commission, said, vowing to support reasonable bond financing needs, mergers and acquisitions, and equity financing of property enterprises.
Yi Gang, governor of the People's Bank of China, said the central bank has adopted differentiated policies from city to city, such as cutting mortgage rates and down payment ratios, to meet people's real housing needs.
As some troubled developers were unable to complete pre-sold housing projects on time, the bank issued 200 billion yuan (about 28 billion U.S. dollars) of special loans to ensure their timely completion, Yi Gang said, adding that the bond issuance by private developers has also received stronger support through credit enhancement facilities.
Some media hyped China's "real estate crisis" and "decline of the construction industry". Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, has made his comment on the issue.
China is still at the peak of urbanization and the beginning stage of rural revitalization, which means the overall fixed asset investment still has great potential for growth.
—— Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission
RENMINBI
Backgrounder: Given repeated U.S. Fed rate hikes, the Chinese currency renminbi, or the yuan, has softened nearly 12 percent in its central parity rate against the greenback as far this year. On the one hand, the weakened currency gives products made in China somewhat price advantages, but on the other hand, Chinese buyers will have to swallow the additional costs of more expensive imports, not to mention a falling yuan's rate can also stoke worries about capital outflows.
"Compared with the previous two periods of U.S. dollar appreciation, the renminbi exchange rate has become less sensitive to U.S. dollar index fluctuations since 2021," said Pan Gongsheng, head of the State Administration of Foreign Exchange.
The U.S. dollar has experienced three cycles of rising and falling over the past decades since the collapse of the Bretton Woods system.
Pan said that compared with the currencies of major developed and emerging markets, the depreciation of the renminbi is at an average level. "Despite fluctuations, cross-border capital flows have been stable and orderly on the whole."
The renminbi's hedging property has become increasingly prominent, Pan said. "As major countries have witnessed higher bond yields and falling prices this year, the renminbi bonds have become one of the few financial assets with stable prices."
With rising risks of economic recession in major developed countries and higher-than-expected inflation, monetary policies globally will generally remain tight and the U.S. dollar may still fluctuate at a high level in the short term, Pan said.
Market institutions predict the momentum of the dollar appreciation is weakening and the strong cycle may have come to an end.
—— Pan Gongsheng, head of the State Administration of Foreign Exchange
MONETARY POLICY
Backgrounder: Although many countries have shifted to a contractionary policy to curb inflation, China has so far maintained its own stance and for multiple times lowered the interest rates to sustain enough growth momentum for the economy. This approach is challenging but has proved to be effective in helping cope with the pandemic and economic headwinds.
"This year, the Chinese economy is faced with some challenges and downward pressure due to COVID-19 and some external shocks, and we have re-calibrated monetary policy in a timely fashion so as to provide greater support to the real economy,"Â Yi Gang said.
Yi said the central bank has made use of a host of policy instruments and cut the required reserve ratio by 25 basis points. The drop in loan prime rate has translated into lower financing costs for the real economy, and broad money M2, social financing and new renminbi loans have all maintained pretty robust growth.
"We have kept the economy stable, preserved price stability at home despite surging inflationary pressure worldwide, and maintained a fine balance between internal and external equilibrium,"Â he said.
China's GDP grew 3.9 percent year on year in the third quarter. The inflation remained tame with consumer price increases at 2.1 percent in October, Yi said, adding that the value and purchasing power of the renminbi has been basically stable.
ECONOMIC OUTLOOK
Backgrounder: 2022 is about to end on a weak note for the global economy and the outlook for the next year is still tenuous. Reeling from COVID-19 flare-ups, China's economy is facing pressure greater than expected. But the country will still outperform other major economies this year and with a more stable long-term prospect.
With the worst inflation in four decades, the United States and western countries made a policy U-turn this year, which, along with epidemic resurgences, geopolitical conflicts and other issues, has made the recovery of the world economy more difficult and uncertain, Guo Shuqing said.
With its unique institutional advantages, China has built the most complete industrial system and fostered the largest unified market, Guo said, stressing the strong resilience, enormous potential, and vast room for maneuver of the economy.
The long-term, sound fundamentals of the Chinese economy will not change.
—— Pan Gongsheng, head of the State Administration of Foreign Exchange
Pan believes the recently optimized anti-epidemic measures will be more scientific and precise and more effectively coordinate COVID-19 control and economic and social development. He also expects the implementation of various policies to stabilize the economy will further unleash the growth momentum.
FINANCIAL OPENING-UP
Backgrounder: China has made significant progress in its financial opening up over the past decade and become one of the most popular destinations for foreign investment. Foreign ownership caps were scrapped for securities, fund management, futures, and life insurance firms, overseas investors have been offered easier access to the country's rapidly-growing markets.
"We will, as always, welcome foreign financial institutions with sound operations, good qualifications and outstanding specialties to participate in the Chinese market," Guo Shuqing said.
Since 2017, the assets of foreign banks in China have increased by nearly 30 percent, and the assets of foreign insurance companies in China have expanded by roughly 120 percent, he said. A number of foreign-controlled companies in wealth and asset management, fund, and insurance have started operations.
China's financial sector has entered a new phase featuring high-standard opening-up, Guo said.