Regulators Say No Massive Inflation In China

- Feb 17, 2020-

Regulators Say No Massive Inflation in China

A number of regulators said at a press conference of the State Council ’s joint prevention and control mechanism for the new coronavirus infection and pneumonia epidemic that the prerequisites for maintaining a sound monetary policy have not changed, and China will not experience large-scale inflation. At the same time, due consideration should be given to the objective impact of the epidemic and the tolerance for non-performing loan supervision shall be appropriately increased. In addition, the balance of payments situation will not be easily changed due to short-term effects such as the epidemic situation. In the future, China's balance of payments will still have a foundation and conditions to continue the basic balance.


imageProperly improve the regulatory tolerance of non-performing loans.

Regarding inflationary pressure, Fan Yifei, deputy governor of the People's Bank of China, said that now that resumption of work and production is still needed, both the demand side and other aspects have brought some pressure on price stability. "But the premise of maintaining a sound monetary policy has not changed. Measures will be taken to adjust these issues in a timely manner. I believe China will never experience large-scale inflation."


Liang Tao, deputy chairman of the China Banking and Insurance Regulatory Commission, said that as a supervisory authority, the CBRC will take a realistic approach to banks in areas affected by the epidemic, take full account of the objective impact of the epidemic, and appropriately increase regulatory tolerance to meet regulatory targets. Give a certain grace period or make some flexible arrangements on the regulatory measures.


Fan Yifei said that the next step is to adjust the tolerance of non-performing loans of commercial banks or make some adjustments. I believe that through efforts, the problem of non-performing loans will be properly resolved. Generally speaking, the proportion of non-performing loans in China is low, and there is a large room for adjustment. I believe we can properly cope with this problem.

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Qi Liangtao said that the next step will be to increase credit protection and investment in the resumption of production in key areas. Guide financial institutions to further increase credit support for enterprises to resume work and production, further increase the proportion of corporate credit loans and medium- and long-term loans, and keep financing costs at a reasonable level. Regarding the capital requirements for purchasing raw materials and equipment that enterprises may face when resuming production and restarting production, it is reasonable to increase the loan support for working capital. To guide institutions to play the role of baton for performance assessment, consider appropriate ways to support the resumed and resumed production of key areas such as manufacturing, small and micro enterprises, and private enterprises into the assessment index system, or reasonably adjust the assessment weight to stimulate grass-roots outlets and the front line Motivation of business people.


Balance of balance of payments and continued basic balance


Talking about the expectations of the balance of payments, Xuan Changneng, the deputy director of the State Administration of Foreign Exchange, said that in recent years, China's balance of payments has maintained a basic balance, reflecting the rational optimization of the deep-level economic structure and the effects of China's adherence to reform and opening . The balance of payments situation will not change easily due to short-term effects such as the new crown pneumonia epidemic.


"The impact of the epidemic is temporary and limited. In the future, China's international balance of payments will still have a foundation and conditions to continue the basic balance." Xuan Changneng emphasized that first, the current account is expected to maintain a small surplus. China's manufacturing industry chain is complete, the transformation and upgrading are accelerating, and the international competitiveness of related products is still strong; China's overseas investment structure has continued to optimize, foreign investment income has increased, and investment income is expected to gradually improve.image


Second, China's cross-border capital flows will still be based on stable operations. The short-term impact of the epidemic will not change the fundamentals of China's long-term good and high-quality development of the economy. It is expected that direct investment will continue to have a surplus overall; the degree of financial openness will increase steadily, and it will be more attractive to foreign investors, which will help keep funds under securities investment. Net inflow; in recent years, the two-way floating of the RMB exchange rate has played a role in cultivating the rational expectations of the market, and the foreign exchange transactions of Chinese enterprises, individuals and other market entities have become more rational.


Xuan Changneng said that in general, in a complex and changing external environment, China's international balance of payments can achieve basic balance, which reflects the strong adaptability of the financial system, and also shows that the basis of internal and external balance and stability of our economy is Stable. In the future, we have the ability and confidence to cope with the impact of various internal and external disturbance factors and maintain the basic balance and stability of the international balance of payments.