On June 23, the Publicity Department of the Central Committee of the Communist Party of China (CPC) held a press conference on “China in the Past Decade.” Chen Yulu, Deputy Governor of the People’s Bank of China (PBC), Xiao Yuanqi, Vice Chairman of China Banking and Insurance Regulatory Commission (CBIRC), Li Chao, Vice Chairman of China Securities Regulatory Commission (CSRC), and Wang Chunying, Deputy Administrator and Press Spokesperson of the State Administration of Foreign Exchange (SAFE) introduced the reform and development of the financial sector since the 18th CPC National Congress and answered press questions.

Shou Xiaoli, deputy head of the Press Bureau and press spokesperson of the SCIO:

Ladies and gentlemen, good afternoon. Welcome to this press conference held by the Publicity Department of the CPC Central Committee. This is the 10th press conference under the theme of "China in the past decade." Today, we're very glad to be joined by Mr. Chen Yulu, deputy governor of the People's Bank of China (PBC); Mr. Xiao Yuanqi, vice chairman of the China Banking and Insurance Regulatory Commission (CBIRC); Mr. Li Chao, vice chairman of the China Securities Regulatory Commission (CSRC); and Ms. Wang Chunying, deputy administrator and spokesperson of the State Administration of Foreign Exchange (SAFE), to brief you on the reform and development of China's financial sector since the 18th CPC National Congress and take your questions.
Now, let's give the floor to Mr. Chen for his introduction.

Chen Yulu, deputy governor of the People's Bank of China:

Friends from the press, good afternoon. China's financial sector has made historic achievements during the past decade since the 18th CPC National Congress. Under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, the PBC has followed the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, fully applied the new development philosophy, consistently deepened supply-side structural reform in the financial sector, steadily increased financial openness, balanced development and security, and advanced high-quality economic development.

Over the past decade, we have prudently implemented a monetary policy independent of undue external influence. On the basis of a comprehensive assessment of the complex and volatile economic and financial situation at home and abroad, we have used monetary policy tools to adjust both the monetary aggregate and structure, prospectively strengthened cross-cyclical adjustments, and weathered the impact of COVID-19 and other domestic and external challenges. In doing so, we have ensured steady growth, kept price rises under control, stabilized employment, and maintained a balance in international payments. We have effectively managed money supply, refrained from indiscriminate and massive stimuluses, and protected the purchasing power of the RMB. Since 2012, M2 money supply has seen an average annual growth rate of 10.8%, basically in line with nominal GDP growth, thus providing a monetary foundation for steady economic growth.

Over the past decade, guided by the new development philosophy, we have provided financial support to the real economy for its high-quality development. We have vigorously promoted green finance and the transition to green and low-carbon development. Green loans and bonds in China ranked among the largest in the world. We have formulated international rules and standards for green finance with other countries and spearheaded green finance across the world. We have upheld innovation-driven development, with medium- and long-term loans for high-tech manufacturing increasing by nearly seven times compared with 10 years ago. We have improved financial inclusiveness to boost coordinated economic and social development. By the end of the first quarter of this year, the balance of inclusive loans to micro and small businesses exceeded 20 trillion yuan, supporting more than 50 million micro and small enterprises and self-employed individuals. We have supported targeted poverty alleviation and rural revitalization with innovative financial services. We have expanded the opening-up of the financial sector by basically setting up the management system for pre-establishment national treatment plus negative list. Domestic RMB financial assets held by overseas entities are 2.4 times higher than 10 years ago. The Chinese yuan has been added to the Special Drawing Rights (SDR) basket of the International Monetary Fund (IMF), and its weight has risen from 10.92% to 12.28%, the third largest in the basket.

Over the past decade, we have focused on both development and security and forestalled systemic financial risks. We have achieved important progress in preventing and defusing major financial risks. We have properly addressed risks in key sectors and kept financial risks overall within a controllable range.

Over the past decade, we have continuously developed financial infrastructure for the era of digital economy and broken new ground in building a modern financial service system. With forward-looking and coordinated plans, we have prudently advanced the R&D and pilot programs for the digital yuan, upgraded the RMB cross-border payment system, built a credit system covering all citizens, and created the world's biggest financial credit information database. We have strengthened financial security defense lines against money laundering and fraud, and enhanced financial consumer protection.

Going forward, the PBC will continue to follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, firmly stick to the path of financial development with Chinese characteristics, and contribute more to building a great modern socialist country and achieving the second centenary goal.

Thank you.

Shou Xiaoli:

Thank you. Now, let's give the floor to Mr. Xiao for his introduction.

Xiao Yuanqi, vice chairman of the China Banking and Insurance Regulatory Commission:

Friends from the press, ladies and gentlemen, good afternoon. Since the 18th CPC National Congress, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, we have made impressive achievements in the financial sector and achieved new leapfrog growth in the banking and insurance industries.

A virtuous circle of the real economy and the financial system has taken shape. Over the past decade, the average annual growth of bank loans and bond investments were 13.1% and 14.7%, respectively, roughly matching the growth of nominal GDP. Interbank financial products and trust products were substantially reduced compared with the historical peak, and the trend of financing activities straying from the real economy was reversed. The insurance depth rose from 2.98% to 3.93%, and the insurance density increased from 1,144 yuan per capita to 3,179 yuan per capita. The serious disease insurance system has covered 1.22 billion residents in urban and rural areas since its establishment in 2012, and long-term care insurance now covers nearly 150 million people. The risk protection provided by agricultural insurance for agricultural households increased from 0.9 trillion yuan in 2012 to 4.4 trillion yuan in 2021, providing critical funding support for post-disaster reconstruction. The annual average growth of inclusive loans for small and micro enterprises was 25.5%, and that of loans for supporting agricultural production, development of rural areas, and agricultural population was 14.9%, both much higher than the average loan growth. In addition, per capita bank accounts stands at about 9.5, and a significant increase has been seen in both the coverage and accessibility of inclusive finance.

Important achievements have been made in forestalling and defusing major financial risks. Departments of financial supervision and regulation resolutely took actions to prevent and resolve financial risks, with the blind expansion of financial assets fundamentally reversed. High-risk shadow banking has been reduced by about 25 trillion yuan compared with the historical peak, while a total of 16 trillion yuan of non-performing assets have been disposed of in the past decade. Many prominent risks were defused, and illegal activities and corruption in the financial sector were severely punished.

Reform and opening up in the banking and insurance sectors have taken on a new look. Continuous efforts have been made to improve the corporate governance of financial institutions and the reform of small and medium-sized banks and rural credit cooperatives has been deepened. Major progress has been made in the pilot reform of the third-pillar pension system, with the exclusive commercial endowment insurance piloted nationwide and the pilot scope of pension wealth product expanded to ten institutions in ten places. By the end of May, more than 60 billion yuan in pension wealth products had been subscribed. Over the past ten years, we have adopted more than 50 policies to expand opening-up in the banking and insurance sectors. In 2021, the total capital and assets of foreign banks in the Chinese market both increased by more than 50% in comparison with ten years ago, and those of foreign insurance companies in China have grown 2.3 times and seven times, respectively, over the past ten years. Many professional banking and insurance institutions, such as foreign wealth management companies and foreign assets management companies, have been actively participating in the development of China's financial market.

An environment of strict supervision and regulation has been fostered. We have formulated and revised more than 70 laws and regulations. Substantial results have been made in legal construction of financial sector. Marked improvement has been seen in our capacity for supervision and regulation in accordance with the law. So far, the identities of a total of 124 stockholders who breached laws or regulations have been disclosed to the public. Through various ways, we severely punished the activities violating laws or regulations committed by banking and insurance institutions and persons responsible, so as to address the prevention of financial risks and crack down on financial corruption through a systemic approach.

Under the guidance of the Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the CBIRC will uphold and strengthen the Party's overall leadership over finance. We will safeguard the establishment of both Comrade Xi Jinping's core position on the Party Central Committee and in the Party as a whole and the guiding role of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, and boost our consciousness of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment with the central Party leadership. We will stay confident in the path, the theory, the system, and the culture of socialism with Chinese characteristics. We will firmly uphold Comrade Xi Jinping's core position on the Party Central Committee and in the Party as a whole and uphold the Central Committee's authority and its centralized, unified leadership. We will steadfastly follow the path of financial supervision and regulation with Chinese characteristics and embrace the successful convening of the 20th National Congress of the CPC with concrete measures. Thank you.

Shou Xiaoli:

Thank you. Now, let's give the floor to Mr. Li Chao.

Li Chao, vice chairman of the China Securities Regulatory Commission:

Ladies and gentlemen, good afternoon. Since the 18th National Congress of the CPC, we have been conscientiously implementing the spirit of the important instructions of General Secretary Xi Jinping on the capital market and implementing the arrangements of the CPC Central Committee. We have comprehensively deepened the reform and opening up in the capital market and worked harder to develop the underlying institutions. As the result, a profound structural change is taking place in the capital market. The inclusiveness of the market system significantly improves and the investment and financing functions are greatly enhanced. A healthy market ecosystem gradually forms. Over the past decade, the sizes of the stock market and the bond market have expanded by 238.9% and 444.3%, respectively, both ranking second in the world. The stock market, attracting more than 200 million investors, is making a great contribution to the country's high-quality development.

Over the past decade, our support for the real economy has covered a wider range and gone deeper. We improved the multi-tiered market system, established the "New Third Board" and the science and technology innovation board (STAR), and set up the Beijing Stock Exchange. As the capital market becomes more adaptive to the real economy, the accumulated financing from bonds and equities has reached 55 trillion yuan. A smooth and highly developed relationship between science and technology, capital, and the real economy has taken shape, and the STAR has nurtured an effect of industrial agglomeration centering on "hard science and technology". The exchange bond market has become an important financing channel for non-financial companies, with future and option products covering the main sectors of the national economy.

Over the past decade, significant breakthroughs have been made in comprehensively deepening reform. Focusing on deepening the supply-side structural reform in finance, we have further advanced the reform in the capital market and the underlying institutions have become more mature and well-defined. We have realized the transformation from an approval-based system to a registration-based system which has been piloted steadily. The issuance became more market-oriented and the approval and registration more efficient and predictable. Critical systems regarding trading and delisting have been systemically upgraded, and the overall reform is in line with market expectations.

Over the past decade, market entities have made new progress in terms of high-quality development. The profits of listed companies in the real economy accounted for nearly 50% of the profits of industrial enterprises above designated size. While ten years ago, the proportion was 23%. Their status as the backbone of the national economy has been consolidated. Over the past ten years, the total assets of securities and futures companies have increased 6.5 times and the scale of public funds has grown 9 times to 26 trillion yuan. The industry has grown significantly.

Over the past decade, the Chinese capital market has become more appealing to the world with an ever-increasing influence. We coordinated opening-up with security and ushered in a new chapter of institutional opening up. We thoroughly eased restrictions on the share of foreign capital in institutions of the industry and launched the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect as well as the Shanghai-London Stock Connect. The A share stocks were added to international indexes and continued to weigh heavier. As for the foreign capital, we have seen its net inflow for years in a row.

In the past decade, the legal system has basically formed a pillar to support the capital market. We saw the introduction of the new Securities Law and Amendment XI to the Criminal Law. The General Office of the CPC Central Committee and the General Office of the State Council have released a document that aims to crack down on illegal activities in the securities market. The introduction of the Law on Futures and Derivatives has paved a sound legal foundation for high-quality development of the futures market. Through these efforts, the deterrence of the law has notably increased as we impose "zero-tolerance" on related illegal activities. Breaking the law or regulations with zero or little consequences has become a thing of the past.

The past decade has seen China's stronger market resilience to counter risks. We continue to improve efficiency in governance through reform, improve internal stability and external constraint mechanism, stabilize market expectations timely, to ensure that the market risks have been reduced at a basically controllable level. In recent years, we have also withstood various unexpected shocks both from within and outside of the country, with our major indicators remaining stable and the development momentum kept consolidating.

Next, we will continue to build a strong mechanism, make no unnecessary interventions and have zero tolerance for illegal activities in order to create an orderly, transparent, open, dynamic, and resilient capital market. These efforts will enable us to pave the way for a successful 20th CPC National Congress.

Thank you!

Shou Xiaoli:
Thank you. Next, I will give the floor to Ms. Wang Chunying.

Wang Chunying, deputy administrator and spokesperson of the State Administration of Foreign Exchange:

Good afternoon. Since the 18th National Congress of the CPC, China has moved further toward high-quality development, and its economy has opened further to the outside world under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core. The SAFE has conscientiously followed the decisions and arrangements of the CPC Central Committee and the State Council, and much progress has been made in our work to reform, develop and stabilize the foreign exchange market.
First, the international balance of payments has maintained its basic equilibrium and become more stable, demonstrating the progress in China's efforts to foster a new development paradigm. Specifically, China's economic development is more balanced, with the surplus of its current account to the GDP within a proper range. Cross-border trade and investment are more dynamic, cross-border balance of payments enjoys relatively rapid growth, and the renminbi exchange rate is more flexible, which has served as an automatic stabilizer in adjusting the international balance of payments.

Second, China's capital account is steadily opening and enjoys relatively high convertibility. Specifically, direct investment is basically convertible, and businesses can independently finance across borders within the framework of macro-management; securities are now open for multi-channel and multi-level investment across borders; residents in China's mainland now enjoys wider channels to invest foreign assets; the renminbi's appeal has grown notably; the volume of overseas investment in China's securities has exceeded US$2 trillion; and the IMF also increased the weighting of the renminbi in the SDR currency basket.

Third, we facilitate cross-border trade, investment, and financing, and notable progress has been made in the reforms to streamline administration, delegate powers, improve regulation, and strengthen services. Specifically, current account transactions that are real and meet regulatory requirements have been fully supported; procedures in capital account transactions like cross-border investment and finance have been constantly streamlined; technology is empowering the administration of foreign exchange through digitalization; and the diversified needs of businesses and individuals have been better satisfied.

Fourth, we continue to improve the unified and open foreign exchange market that features orderly competition and effective regulation, creating a sound environment to effectively allocate foreign exchange resources and control foreign exchange risks. Over 40 currencies, a three-fold increase since the 18th National Congress of the CPC, can be traded in the foreign exchange market, covering all the international mainstream products. The total trade volume hit $36.9 trillion in 2021.

Fifth, we have ensured the safety of our foreign exchange reserve, made sure it flows, and kept protecting and increasing its values. The operation and management system of the foreign exchange reserve with Chinese characteristics has constantly improved. In recent  years, our foreign exchange reserves have stayed above $3 trillion. By the end of May, the reserve hit $3.1 trillion, securing its first place in the world for 17 consecutive years. It has played its due role in stabilizing China's economic and financial security.
In the next step, the administration will continue to follow Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, better coordinate development and security, accelerate the building of a foreign exchange management system that is commensurate with the modern governance system and capacity, and further contribute to the efforts of building China into a great modern socialist country. Thank you.

Shou Xiaoli:
Thank you, Ms. Wang, for your remarks. The four speakers have made a general introduction of the reform and development of the finance sector in the past decade. For more information, please refer to the handouts with more figures and graphs we distributed here today.

Now the floor is open for questions. Please identify the media outlet you represent before raising your questions.

Reuters:
I have a question on the three policy transmission. What progress has the People's Bank of China made in recent years in improving its policy transmission mechanism? Recently, the central bank has rolled out a series of structural policy tools to cope with economic shocks from COVID and to support green development as well as tech innovation. But some are worried that the overuse of structural tools could weaken the role of aggregate tools. While relying on quantity-based tools would affect the transition to a price-based monetary policy framework. What is your view on this? Thank you.

Chen Yulu:

Thank you for your professional questions, which have also drawn much attention from many experts recently. Over the years, the PBC has followed the decisions and plans made by the Party Central Committee and the State Council, stuck to a prudent monetary policy, and adopted innovative and a variety of monetary policy tools. Meanwhile, the PBC attached importance to getting interest rates and prices to fully play a leveraging role in order to promote the forming of a positive cycle between the financial sector and the real economy. Practice proves that, over this period, there has been a significant improvement in the transmission effects of our monetary policies, which are as follows:

First, we improved the mechanism to control the money supply. As I mentioned before, we have ensured the valve on aggregate monetary supply is well controlled and maintained reasonably sufficient liquidity at the same time. The increases in M2 that you just mentioned and aggregate financing have been in general step with nominal GDP growth, facilitating the national economic operation to achieve a development featured with relatively high growth, low inflation, and sound employment.

Second, in the past decade, we have gradually established a structural monetary policy toolkit that matches China's national conditions. We focused on supporting key areas and weak links in the national economic development, such as inclusive finance, green development, and sci-tech innovation. With the structural monetary tools, we effectively responded to the impact caused by COVID-19 pandemic and fully implemented the new development paradigm, pushing forward the national economy to achieve high-quality development.
Third, we gradually improved the market-based interest rate mechanism and the adjustment and transmission mechanism. We focused on reforming the loan prime rate (LPR) and established a new transmission mechanism in which the market interest rates and the PBC influence the LPR, which then influences the loan interest rates. In terms of deposits, we also established a market-based mechanism to adjust deposit rates so that the changes to deposit rates are in step with that of LPR and the government bond yields in order to push forward the formation of market-based deposit rates.

I want to point out that structural monetary policy tools serve the purpose of adjusting aggregate money supply and structural adjustment as well. That means, by leveraging structural monetary tools, we could funnel more targeted support and adjust the aggregate money supply at the same time. On the one hand, in terms of making structural policy tools, the PBC followed the trend of the times, which is to build a mechanism featured with incentive compatibilities in line with the principle of consistency of objectives. The central bank will pump cash into the financial institutions that give credit supply to specific areas and industries in order to keep these financial institutions fully motivated. In this way, the credit structure will be further improved. On the other hand, structural monetary policy tools are also a way of increasing the monetary base, which will help to maintain reasonably ample liquidity in the banking system and the steady growth of credit supply.

The PBC has applied structural monetary policy tools under the aggregate framework and made relevant adjustments to match the focuses of economic development at different stages, which means keeping the number and scale of structural monetary policy tools we adopted at an appropriate level and coordinating them with policy tools used to adjust the monetary aggregate. The market may also have noticed that the interest rates of structural monetary policy tools bear no big difference from that of the market. Therefore, such tools will not have a big impact on market-based interest rates.

Thank you.

Economic Daily:

Since the 18th CPC National Congress, especially as the capital market deepened reform across the board at a faster pace in recent years, there has been a significant improvement in the efficacy of the market, the market ecology has continued to improve, and the capabilities to serve the real economy has kept growing. What are the structural changes that have occurred regarding the capital market in the past decade? Would you like to give us an introduction? Thank you.

Li Chao:

Thank you for your question. Structural problems are a key issue impeding the high-quality development of the capital market. Over the years, we have relied on reforms to address structural difficulties. It is fair to say that, with the past 10 years' efforts to develop and reform, there have been many positive structural changes, which are as follows:

First, the structure of a multi-level market system has changed greatly. With continuous efforts, the multi-level market system improved with increasingly prominent characters in each market and board. For example, the main boards of the Shanghai and Shenzhen stock exchanges highlighted the positioning of "main boards for blue chips." China's Nasdaq-style sci-tech innovation board, also known as the STAR market, is characterized by "hard technology." The ChiNext board continues to provide services for innovative start-ups and companies. The Beijing Stock Exchange and the "new third board" focus on serving innovative small and medium-sized enterprises. In addition, venture capital and private equity funds have played an increasingly important role in the capital market.

Second, the structure and quality of listed companies saw significant changes and improvements. In terms of the industries, there have been fundamental changes in the structure of listed companies. The number of companies listed in strategic emerging industries totaled nearly 2,200, and the number of listed companies in strategic emerging industries valued at over 100 billion yuan has increased from zero to 46. Listed companies have become an important driver for economic transformation and upgrading. In terms of performance, the asset size of listed companies has increased two-fold compared to 10 years ago. Revenues and net profits have maintained relatively high growth. The accumulated cash dividends in the past three years totaled 4.4 trillion yuan, increasing by nearly 50% compared to the previous three years. In terms of governance effectiveness, the listed companies have seen their operations increasingly standardized and addressed a series of deep-rooted problems in the capital market through collective efforts, such as the occupation of funds by large shareholders and illegal guarantees.

Third, the effect of the market law of "survival of the fittest" is shown quickly. With a distinct feature of an A-share market's differentiation being more evident, investors from various fields prefer the leading stocks and good performance stocks. A regular delisting mechanism has been gradually established, with its process being significantly streamlined. From 2019 to 2021, the number of firms experienced compulsory delisting was more than three times the total of the previous decade, and a sound ecosystem that provides a two-way access for getting listed and delisted is taking shape faster.

Fourth, the investor structure has been gradually optimized. The professional, institutional investors continued to grow. By the end of this May, the market value of stocks in circulation owned by domestic professional, institutional investors and foreign shareholders accounted for 22.8 percent, up 6.9 percentage points from 2016. In 2021, the proportion of individual investors' transactions decreased to less than 70% for the first time, and the concepts of value investment, long-term investment, and rational investment were gradually developed.

Fifth, the structure of the product supply system has also been changed and diversified. We continued optimizing the mix of equity, bond, and future products, enriched risk management tools to meet residents' demands for wealth management, and have better served major national strategies. We timely launched products such as asset securitization, sci-tech innovation bonds, and green bonds, as well as pilot public offering of REITs in the infrastructure sector. The access system for public fund products has been greatly simplified, the scale of equity funds has kept reaching new highs, and the participation of public funds in elderly care financial services has been continuously deepened.

Sixth, the guidance of respecting integrity and abiding by the law as well as punishing evil-doers and praising good-doers has continued to be strengthened. With the improvement of the all-around insurance system and the mechanism of "zero tolerance" in cracking down on crimes, the market operations are conducted in a more honest and law-based way. For example, we had inflicted much heavier criminal punishment for crimes such as fraudulent issuance and fraudulent information disclosure. For another example, the right safeguarding channels for small and medium investors were unblocked and the first securities class-action suit against Guangzhou-based Kangmei Pharmaceutical was resolved, with 52,000 investors reclaiming losses of 2.459 billion yuan, demonstrating that a diversified mechanism for rights exercise and protection focusing on resolving disputes through varied ways, supporting litigation, and representative litigation is taking effect.

Thank you!

China Media Group:

My question is: what is the current state of macro leverage ratio? In addition, following the change of macro leverage ratio in recent years, what has been the effect of macro-control policies? Thanks.

Chen Yulu:

Thanks. The change of macro leverage ratio is an important indicator to measure the effect of macro-control. In recent years, the PBC has constantly improved the financial macro-control system as well as innovated and optimized the way of macro-control. Given the generally stable macro leverage ratio, the PBC has supported the development of the real economy and effectively ensured China's national economy operates within an appropriate range.

Chronologically, China's macro leverage ratio was 272.5% by the end of 2021, up 23.9 percentage points from the end of 2016, or an average annual increase of about 4.8 percentage points in the five years. Between 2016 and 2021, China's annual growth of GDP was about 6%, and that of CPI about 2 percent, with more than 13 million new urban jobs being created per year. In other words, the growth of China's moderate and controllable macro leverage ratio has supported an optimal combination of "higher growth, lower inflation, and more jobs," achieving great results in macro-control.

From a horizontal perspective, since the outbreak of COVID-19, China has supported the rapid recovery of the economy with relatively few new debts, and the increase in the macro-leverage ratio was significantly lower than in other major economies. After the outbreak of the pandemic, countries have generally adopted ultra-loose stimulus policies to deal with the recession, causing a substantial increase in the macro-leverage ratio. At the end of 2021, the average level of the leverage ratio of all reporting countries was 264.4%, 18.3 percentage points higher than at the end of 2019, according to the Bank for International Settlements. In comparison, China's figure is 16.5 percentage points, which reflects our macro policy orientation of not resorting to a deluge of strong stimulus policies, not over-issuing currency, and not over-drafting the future. While stabilizing the leverage, China's economic performance continued to lead, and inflation was generally under control. From 2020 to 2021, the average two-year growth rate of China's economy is 5.1%, which is 4.1, 6.6, and 5.7 percentage points higher than that of the United States, Japan, and the euro area, respectively. The inflation level is also significantly lower than that of major developed economies.

Therefore, in general, China's macro-control policies in recent years have been powerful, measured, and effective. The macro-leverage ratio has generally achieved stability as our top priority, ensuring that the national economy operates within a reasonable range, and has also made positive contributions to global economic growth, becoming an important power source and stabilizer for the global economy.

Thank you.

Yicai:

Since the beginning of this year, we have observed that the US Fed's monetary policy adjustment is an important factor affecting the international financial market and China's foreign exchange market. We have also seen that, in recent years, the external environment has always been complex and volatile. Faced with such risks and challenges, how do you evaluate the operation of the foreign exchange market and cross-border capital flows over the past decade? Thank you.

Wang Chunying:

In recent years, the external environment has been quite complicated, which has brought great challenges to the operation of China's foreign exchange market. Since the 18th CPC National Congress, China's economy has achieved high-quality development, laying a solid foundation for the stable operation of the foreign exchange market. During this process, the forex market has continuously strengthened its resilience and successfully responded to multiple rounds of external shocks. The scale of cross-border transactions increased significantly, foreign exchange reserves were generally stable, and the RMB exchange rate remained basically stable at a reasonable and balanced level. In general, in the past decade, China's forex market has shown more mature development characteristics. I would like to elaborate on it from the following five aspects.

First, the balance of international payments has a more stable structure. The current account surplus has always been in a reasonable and balanced range. The structure of China's external financial assets and liabilities has been gradually optimized, and the scale of assets held by the private sector has continued to increase. Foreign direct investment continues to increase, and foreign debt growth is mainly due to the long-term overseas funds' allocation to Chinese bonds. The external debt structure has been optimized, and risks are controllable.
Second, the financial market is more open. Cross-border securities investment channels are further expanded, and convenience is further improved. Domestic stocks and bonds are gradually included in mainstream international indices, and the scale of cross-border investment and financing transactions has increased. The depth and breadth of the forex market continue to expand.

Third, the automatic stabilizer function of the exchange rate to adjust the balance of payments is more visible. The two-way volatility and enhanced flexibility of the RMB exchange rate can release external pressure in a timely and effective manner and help stabilize market expectations. At the same time, the proportion of RMB in global foreign exchange reserves and international payments and settlements continue to increase, which helps reduce risks such as currency mismatches in China's cross-border transactions.

Fourth, forex market participants are more rational. We have seen that market players have gradually adapted to the two-way exchange rate fluctuations and have generally maintained a rational trading model. Enterprises' exchange rate risk neutrality awareness is increasing, and their ability to manage exchange rate risk is constantly improving.

Fifth, the forex market management framework of "macroprudential approach plus micro-regulation" has been improved. Cross-border capital flow monitoring, early warning, and response mechanisms continue to improve. Macroprudential tools are more substantial, and micro-regulatory enforcement standards remain consistent, stable, and predictable across cycles.

Looking ahead, the fundamentals of China's long-term sound economic growth have remained unchanged. With the reform and opening-up going further, China's cross-border trade, investment, and financing activities will remain active, and the stable operation of the forex market will have a more solid foundation.

Thank you!

China News Service:

Mr. Xiao, you just introduced the reform of China's banking and insurance industries. Could you please elaborate on the major changes in the development pattern and comprehensive strength of the two industries in the past 10 years? In particular, what progress has been made for the banking industry in international financial services and the insurance industry in terms of risk protection? And what are the next moves? Thank you.

Xiao Yuanqi:

Thank you for your questions. Over the past decade, we have taken several approaches. At present, the entire development pattern of the banking and insurance industries has undergone some changes.

First, the comprehensive strength has been reinforced. Thus far, the total assets of China's banking industry are 344.8 trillion yuan, as compared to 133.6 trillion yuan at the end of 2012. It has now become the world's largest banking market. The total assets of the insurance industry increased from 7.4 trillion yuan at the end of 2012 to 24.9 trillion yuan at the end of 2021, making it the second-largest insurance market in the world. In the ranking of the world's top 1,000 banks, nearly 150 Chinese banks are on the list. China's four major banks -- the Industrial and Commercial Bank of China (ICBC), the Agricultural Bank of China (ABC), the Bank of China (BOC), and the China Construction Bank (CCB) -- have become global systemically important banks. The total capital of China's banking and insurance industries has increased from 9.5 trillion yuan at the end of 2012 to 32.4 trillion yuan at the end of 2021, so the capital strength has been greatly reinforced.

Second, the financial structure has been continuously optimized. The proportion of indirect financing and direct financing is much better suited for serving economic and social development and financial needs. The allocation of urban and rural financial resources has become more reasonable. At present, there are 8.8 banking institutions and 15.8 insurance institutions on average in each county. More financial resources have been channeled to counties and the countryside. The concentration and decentralization of financial resources have become more balanced. The financial assets of the top five banks account for 38% of the total. Such a proportion is relatively reasonable, which is conducive to the rational allocation of financial resources and the maintenance of financial stability. Also, we have a relatively appropriate share and deployment of large, medium, small, and micro banking and insurance institutions. A financial institution system has been formed, within which the institutions facilitate and complement one another. At present, China's financial structure is basically consistent with China's economic system, economic development stage, prevailing financial practice, and financial needs.

Third, the financial governance system with Chinese characteristics has been continuously improved. The centralized and unified leadership of the Party over financial work has been comprehensively strengthened, the Party's leadership has been included in all aspects of corporate governance, the share structure has been optimized, and shareholding regulation has continued to be enhanced. The operation mechanism featuring shareholders' meetings, board of directors, supervisory board, and senior management structure has been more reasonable. The checks and balances within the financial institutions and external supervision have had a positive effect on each other.

You also asked about inclusive finance and insurance industry's risk protection. Regarding inclusive finance, all villages have access to basic financial services. The loan interest rate for inclusive loans of micro and small businesses has dropped by more than 2 percentage points, and the availability of rural financial services has continued to increase. At the end of 2021, agriculture-related loans exceeded 43 trillion yuan, an increase of 25.6 trillion yuan over the end of 2012. Large and medium-sized banks have also generally established inclusive finance departments or other specialized institutions. Inclusive financial services stayed ahead internationally.

Regarding risk protection of the insurance industry, we know that the insurance industry can serve as an economic "shock absorber" and a social "stabilizer," and can play an important role in many fields. For example, we have provided insurance for more than 3.3 billion doses of COVID-19 vaccination. Environmental pollution liability insurance has also covered more than 20 industries with high environmental risks. Technology insurance has strongly supported innovation and development. In addition, catastrophe insurance, agricultural insurance, and other insurance have provided a very important source of funds and protection against risks for post-disaster reconstruction and enterprises and residents to quickly return to normal life and work after a disaster.

In general, the world has marveled at the achievements of China's banking and insurance sector in the past decade. In the next step, we will continue our efforts mainly from the following aspects:

First, we will continue to optimize the financial structure. Second, we will continue to deepen the reform of banking and insurance institutions, and strengthen the construction of corporate governance, especially the reform of rural credit cooperatives, urban commercial banks, and the insurance marketing system. Third, we will further strengthen risk prevention and control and emphasize the improvement of the endogenous capabilities of banking and insurance institutions in preventing and controlling risk. Fourth, we will build a financial supervision system with Chinese characteristics to ensure all financial activities are supervised across the board and establish a full-chain and all-round supervision mechanism arrangement before, during and after the event.

Thanks!

Bloomberg:

My question is about the banking system. What's the latest assessment risks associated with the nation's smaller banks? Some rural banks in Henan were found to be a part of a suspected financial scam involving tens of billions of yuan. Do you have any comment on this? This specific case and on the broader risk field of the smaller banking sector. Also, to what extent has the property market slowdown impacted banks' asset quality? And what measures do you plan to resolve these risks? Thank you.

Xiao Yuanqi:

Thank you for your questions. This issue also concerns us. We are paying a lot of attention to the healthy development of small and medium-sized banks, especially small banks. There are currently 3,991 small and medium-sized banks in China, including 147 city commercial banks (including private banks), 2,196 rural credit cooperatives (including rural commercial banks and rural cooperative banks), and 1,651 village and town banks. The total assets of these banks reached 92 trillion yuan, accounting for 29% of the whole banking sector, mainly focusing on providing financial services for small and micro enterprises and services related to "agriculture, rural areas, and rural residents." Related loans accounted for 47% and 40% of the total banking sector.

Concerning the non-performing loans (NPLs) you just asked about, we have made great efforts in disposing of 5.3 trillion yuan of NPLs at small and medium-sized banks in the past five years. On the whole, small and medium-sized banks in China are operating smoothly and developing in a healthy way. Generally speaking, the risks are completely manageable, though there are still some problems, in particular, certain individual institutions are relatively high-risk, and some are suspected of crimes. The legitimate rights and interests of financial consumers are protected in accordance with the law, and the financial regulatory authorities will spare no effort to do a good job in related work.

We have taken the following measures to deal with non-performing assets and relevant risks.

First, we have taken coordinated action to advance reform and risk-defusing. In our efforts to advance reform and defuse risks for small and medium banks in a coordinated way, we have focused on corporate governance and mechanism building. We have also given priority to fostering their internal momentum for development, prevention, and control of risks, and ensuring the delivery of the duties of all parties. For individual key institutions, we adopted tailored policies for each bank to make plans for deepening reforms and defusing risks.
Second, we have strengthened our efforts to deal with non-performing assets. We have carried out the classification of non-performing assets of the small and medium banks, improved the provision coverage ratio, and stepped up efforts and taken more measures to dispose of non-performing loans. At the same time, we have also provided policy support for small and medium banks to dispose of non-performing loans.

Third, we have worked to replenish capital through multiple channels. We have taken coordinated steps to aid the internal capital replenishment of small and medium banks and the external capital replenishment of the market, including both domestic and overseas markets. At the same time, under the guidance of the Party Central Committee and the State Council, we have launched a mechanism to make good use of the special bonds issued by local governments to replenish capital, which is currently being advanced prudently and has yielded positive results and which has greatly enhanced the capital strength of small and medium banks.

Fourth, we have improved corporate governance. We have explored and advanced the integration of Party leadership and corporate governance in small and medium banks and to build a simple and practical corporate governance arrangement that is in line with the reality of small corporations. As the scales of some small banks are very small, with assets and liabilities of only hundreds of millions of yuan or billions of yuan, when it comes to corporate governance, it is necessary to construct simple and effective corporate governance arrangements based on the characteristics of these institutions, including scale, complexity of business, and requirements for risk control and prevention. In the meantime, we have actively developed a professional manager market and improved professional thinking, professional expertise, and professional methods. In terms of shareholder behavior and equity management, it is necessary to further strengthen supervision, especially to restrain the behavior of major shareholders, strictly prevent illegal affiliated transactions, and severely crack down on illegal and criminal activities.

Fifth, we have strengthened the empowerment of science and technology. We have promoted the digital transformation of the small and medium banks and made use of technology to consolidate the traditional advantages of small and medium banks in supporting agriculture and small enterprises.

Six, we have improved the layout of institutions. We have advanced the development of a differentiated, distinctive institutional system where institutions cooperate and compete with each other to meet the increasingly diverse financial needs of the people and to enhance the capacity of the small and medium banks to serve the real economy, effectively preventing and controlling risks and achieving sustainable development.

Regarding the issue of some village banks in Henan province, local police authorities and financial sector regulators have recently informed the media about that issue. At present, the police are investigating the cases and has detained a group of criminal suspects and seized a number of assets involved in the cases. The CBIRC will offer its coordination with local CPC committees and governments to ensure relevant work is done to good effect. We have instructed Henan Banking and Insurance Regulatory Bureau to perform its oversight duties and protect the legitimate rights and interests of the people in accordance with the law.

Thank you!

The Beijing News:

Since the 18th CPC National Congress, the capital market has launched a series of measures in implementing the innovation-driven development strategy and supporting scientific and technological innovation, which has achieved positive results. For example, since its establishment three years ago, the STAR Market has supported over 400 sci-tech companies in getting listed. Can you give us a detailed introduction?

Li Chao:

Thanks for your question. The capital market has special advantages in supporting scientific and technological innovation. Apart from establishing the STAR Market, we have worked on giving full play to the special function of the capital market in providing full support for scientific and technological innovation, which has achieved notable success. For example, during the trial for the registration-based IPO system, we made some institutional arrangements and reforms regarding the STAR Market and the ChiNext stock market. The establishment of the Beijing Stock Exchange is also a very important step in supporting innovative small and medium enterprises. And we also made some institutional arrangements for the reasonable operation of a delisting system for venture capital and private equity. The bond market has developed new types of bonds for innovation and business startups and scientific and technological innovation, giving strong support to sci-tech companies. As for the stock market, we have set diversified and inclusive issuance and listing qualifications to allow sci-tech companies that meet the requirements, such as pre-revenue sci-tech companies and sci-tech companies of special shareholding structure, to get listed. And we have implemented a more flexible equity-based incentive mechanism. All of these measures have played a significant role in promoting the development of sci-tech companies.

In the meantime, their financing capability has been continuously improved. In the past two years, the number of IPO companies on the STAR Market and the ChiNext stock market accounted for over 70% of the domestic market over the same period. And private equity funds have invested a total of over 10 trillion yuan in unlisted companies, with the investment into the field of scientific and technological innovation taking up a considerable proportion. The support of the capital market for scientific and technological innovation comes from not only the financing but also incentive mechanisms. The capital market has provided unique, diversified, and effective incentive mechanisms for sci-tech companies. Demonstration and agglomeration effects have gradually come into being. A group of technologically advanced and market-recognized sci-tech companies has successively entered the capital market, with sectors such as integrated circuits and biomedicine much preferring the STAR Market.

Based on the sci-tech companies listed on the STAR Market in recent years, technology breakthroughs and independent innovation have been speeding up. In 2021, the ratios of the R&D expenditure to operating revenues of the companies listed on the STAR Market and the ChiNext stock market were 9.6% and 4.6%, respectively, much higher than other boards and unlisted companies, which has played a positive role in creating a favorable atmosphere for scientific and technological innovation throughout society.

Thank you.

Financial News:

General Secretary Xi Jinping has made it clear once and again that China's door will never be closed. It will only open still wider. Over the past decade, what have we done to deepen reform and opening-up in the foreign exchange sector? What progress has been made in promoting the facilitation of cross-border trade, investment, and financing? Thank you.

Wang Chunying:

Thank you for your questions. Since the 18th CPC National Congress, with a commitment to the general principle of pursuing progress while ensuring stability, the SAFE has kept deepening reform and opening-up in the foreign exchange sector and strived to enhance the level of cross-border trade, investment and financing facilitation to serve the high-quality development of the real economy. To answer your questions, I would like to give an introduction through the following three aspects:

First, we have made steady progress in promoting high-standard opening up of capital accounts. On the one hand, we coordinated trading and exchanging and further opened up non-convertible items under the capital account in an orderly way while facilitating those already convertible items. After basically realizing the convertibility of direct investments, we promoted the connectivity of cross-border securities markets with a focus on the financial market opening up and improved qualified institutional investor programs which are familiar to us, such as QFII, RQFII, and QDII. In addition, we worked together with relevant departments to launch the Shanghai-Hong Kong Stock Connect, the Shenzhen-Hong Kong Stock Connect, and the Mainland-Hong Kong Mutual Recognition of Funds to open up China's bond market in an orderly manner. As a result, Chinese government bonds have been included in the three major global indexes. Also, we established a management system of cross-border financing within the framework of macro-management, enriched financing channels of market entities, and lowered financing costs. On the other hand, we actively served regional openness and innovation, promoted Shanghai as an international financial center based on RMB financial assets, supported the development of the Hainan Free Trade Port and Guangdong-Hong Kong-Macao Greater Bay Area, and supported pilot free trade zones and other leading opening-up areas in piloting foreign exchange management innovation. We also carried out trials of high-standard opening up of cross-border trade and investment to explore safer and more open institutions and mechanisms for managing foreign exchanges.

Second, we have continued promoting the reform to facilitate cross-border trade, investment, and financing. I would like to introduce the following aspects: The first is to uphold the principle of current account convertibility. We continued deepening the reform of trade and foreign exchange management, shortening the average time for certain services by over 75% and cutting human costs by more than one-third. Competitive trade firms could get immediate foreign exchange settlement soon after application. The second is to actively serve the healthy development of cross-border e-commerce and other new trade types. We encouraged financial institutions to provide entities of new business types with secure, efficient, and low-cost service of cross-border currency settlement. In 2021, 1.9 billion settlements were completed. The third is to take several measures to facilitate the use for foreign exchange capital, such as those facilitating payments by capital account revenue and trials to facilitate cross-border financing.

Third, we have deepened innovative development in the foreign exchange market. The first is to enrich market participating entities. China's foreign exchange market now sees 773 participating institutions, including 136 foreign institutions. The second is to launch more trading products to form a relatively mature international system for forex products. I just said in my opening speech that more than 40 currencies are tradable in our foreign exchange market. The third is to support enterprises to improve exchange rate risk management. During the first five months of this year, the hedge ratio for foreign exchange enterprises doubled that of 2012.

Next, we will unswervingly promote reform and opening-up in the foreign exchange sector and further facilitate cross-border trade, investment, and financing to better serve the new development paradigm with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. Thank you.

21st Century Business Herald:

Preventing and defusing financial risks is the eternal theme in the development of the financial industry. What progress has been made by the CBIRC in preventing and defusing financial risks since the 18th CPC National Congress? How about the overall risk of the financial industry? What are your next plans in this regard?

Xiao Yuanqi:

Thank you for your questions. As we all know, preventing and defusing financial risks is the eternal theme in the development of the financial industry. We have always adhered to rational thinking and been prepared for worst-case scenarios to defuse risks in key institutions, key links, key business areas, and key regions. In the past decade, we have handled a multitude of outstanding risks. First, the infectivity and spillover of outstanding risks have shrunk sharply. Risks of illegal financial groups have been prudently defused and dismantled; risks of small and medium-sized banks and insurance institutions have been handled, and their reforms and restructuring have been advanced. In the past decade, we have restored and dealt with over 600 high-risk small and medium-sized institutions. We've just mentioned what has been done to deal with risks of small and medium-sized banks. Thanks to these measures, the operation of these banks is quite stable, their development is sound, and their risks are completely controllable. In addition, we have also dealt with a multitude of risks of big companies which involved a wide range of debts in large amounts. For example, debt-to-equity swaps conducted in a way consistent with market principles and the rule of law had reached nearly 2 trillion yuan by the end of last year.

Second, the trend of financial assets being diverted out of the real economy has been reversed. We have resolutely cleared activities of diverting financial assets out of the real economy, raising leverages in a disorderly manner, and using funds for speculation. For some time in the past, especially in the past five years, the total assets of banking and insurance sectors saw an average annual growth of 8.1% and 11.4%, respectively, lower than that of credit loans and bond investments during the same period, which has fundamentally reversed the momentum of funds circulating solely within the financial sector. Funds entering the real economy have increased substantially, intermediate chains have been greatly reduced, and financing costs have also decreased.

Third, the financial order has been largely improved through governance. We cracked down on illegal financial activities, released guidelines on preventing and dealing with illegal fundraising, and stepped up efforts to launch campaigns to regulate P2P online lending. More than 5,000 P2P lending institutions have been closed, and regular campaigns have been launched to regulate equity transactions and connected transactions of banks and insurance institutions, with focus on cracking down on illegal shareholders and executives who maliciously hollow out financial institutions.

Fourth, the long-term mechanism for preventing and defusing financial risks has been improved. We have continued to strengthen the Party leadership over the financial system, accelerated the establishment of a regular mechanism for dealing with financial risks, improved corporate governance of financial institutions, especially strengthened management of equity transactions and connected transactions, and given full play to the role of the financial stability guarantee fund and industry guarantee funds, in an effort to build a strong shield for preventing and fending off financial risks.

Fifth, efforts to crack down on corruption in the financial sector and deal with risks have been stepped up in tandem. We resolutely investigated and handled corruption behind risks and severely punished all kinds of illegal and criminal acts. A number of major cases with bad market impact were investigated and dealt with decisively, and corrupt officials who maliciously hollowed out financial institutions, or were involved in transfers of interests and illegal occupation, were brought to justice.

Sixth, the level of transparency and the rule of law in financial regulation has been improved. In particular, we have continued to improve the regulatory framework, the principle of prudent regulation, and made oversight more digital and intelligent. Meanwhile, we have strengthened the training of supervisory teams and improved their regulatory capacity so as to build an iron team that is loyal, clean, and responsible.

Next, the CBIRC will strike a balance between ensuring stable growth and preventing risks in accordance with the fundamental principles of maintaining overall stability, ensuring coordination, implementing category-based policies, and defusing risks through targeted efforts, so as to ensure that no systemic or regional risks arise. Thank you.

CNBC:

I have two questions. First, what are the priorities of reform and opening up in the financial sector? Second, fund management companies should establish Party organizations, as stated by the newly revised Measures for the Supervision and Administration of Managers of Publicly Offered Securities Investment Funds, which took effect on June 20. With recent changes to the international political environment, foreign companies will worry more about data security and ties to the Party. Meanwhile, Premier Li Keqiang noted again in May that China will continue its reform and opening up; and he has also mentioned financial reforms and opening up over the past years. In this context, how will the above-mentioned requirements be implemented in foreign fund management companies?

Chen Yulu:

I'll take the first part of your questions, and the rest will be taken by Mr. Li Chao.
Regarding financial reform and opening-up, I believe that reform and opening-up is a sure path for financial modernization. Since the 18th

CPC National Congress, China has seen remarkable progress in reforming and opening up its financial sector, and its financial system remains robust, providing strong support for the high-quality development of the national economy and the country's modernization process.
Looking forward, China's financial system will resolutely follow the path of financial development with Chinese characteristics, strive to achieve the sector's long-term stability, and stay committed to continuous reform and opening-up. To further carry out financial reform and opening-up, we need to focus on the following aspects:

First, we need to always uphold the CPC Central Committee's centralized and unified leadership in the financial sector and improve the financial administration system. Regulatory bodies' roles should be given full play in fulfilling their responsibilities for regulation and risk management, and negligence and the dereliction of duty shall be held to account. We will speed up introducing regulations on local financial supervision and administration, specify the duty and power of local financial regulatory bodies, and achieve high-level compatibility in financial regulation between central and local governments.

Second, we should ramp up efforts to improve the governance of financial data and improve our fintech capacity. Dynamic monitoring shall be rolled out comprehensively toward financial operations and risk conditions.

Third, the market access threshold of financial institutions should be refined. Regulatory efforts will be made to further look through financial institutions' shareholders and strengthen the work to identify and crack down on illegal financial activities.
Fourth, we need to improve the compatibility between financial systems and the real economy, optimize direct and indirect financing, and promote the reform and restructuring of small- and medium-sized financial institutions. Illicit cross-regional and out-of-scope financial activities shall be eliminated.

Fifth, we need to improve the finance-related rule of law and remedy the weak points of our institutions. All financial activities will be kept consistent with the rule of law, and more efforts should be made to expedite the introduction of the law on financial stability.

In terms of expanding high-quality financial opening-up, on the premise of keeping things safe and under control, we need to align with international standards, promote higher-level opening-up based on the negative list, and realize systemic and institutional openness.

First, we will further improve the management model based on pre-establishment national treatment and negative list. We will carry out the Regional Comprehensive Economic Partnership (RCEP) and align with high-level international financial rules. We will also make preparations to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA).

Second, we will provide more convenience for overseas investors in investing activities in China's financial market. We will offer more asset types for them to invest in, improve relevant systems and rules, and keep optimizing the business environment.

Third, we will introduce a regulatory system that meets the requirements of high-level financial opening-up. We will improve the professionalism and efficacy of financial regulation, introduce various "firewalls," and resolutely forestall systemic financial risks.

Thank you.

Li Chao:

I'll take your second question. In accordance with the decisions being made by the CPC Central Committee on opening up the financial sector, we have seen positive progress over the years in the opening-up of the capital market and securities and fund industry, including the market itself and its access threshold.

In terms of the market access threshold, for example, the foreign capital limit in China's public offering funds was raised to 51% in 2018, and the limit was completely removed in 2020. Currently, there are 48 public offering funds in China that have foreign investors holding or controlling shares. Forty-five of these funds are joint ventures, and the remaining three are owned wholly by foreign investors. In this sense, fund management companies that are invested by foreign businesses are a very important part of China's public offering funds sector.
Recently, the CSRC issued the measures for the supervision and administration of publicly offered securities investment fund managers and the relevant supporting rules. This set of measures mainly aims to clarify regulatory requirements at every link for full coverage, which is an international standard. The measures included the requirement for such funds to establish Party organizations, which is in accordance with China's relevant laws and regulations, including the company law. So, we think this requirement is in line with the principles regarding company governance, rather than being against them or becoming their replacement. As for the data security issue you just mentioned, I can say responsibly that you need not worry at all because the establishment of Party organizations and data security are not associated with each other. Before the issuance of the measures, some publicly offered funds had set up Party organizations. In practice, Party organizations play a very positive role in the healthy and regulated development of companies. Going forward, we will continue to insist on reform and opening up and make more efforts unswervingly. Thank you.

Shou Xiaoli:

The last question.

Red Star News:

My question is about micro and small businesses. The development of such businesses affects the national economy and people's livelihood while contributing to the resilience of the economy and employment. What the financial sector has done in recent years to facilitate such businesses, and how is the effect? What kind of measures will be taken next to better support and serve such businesses?

Thank you.

Chen Yulu:

I will answer this question. This question is asked almost every time when I participate in news conferences hosted here. This shows people are deeply concerned with the difficulties and high costs of financing of micro and small businesses. The PBC and other financial regulatory departments have made continued efforts to tackle this issue in recent years. And we may say that we have made great progress and achieved remarkable results.

As you just mentioned, micro and small businesses are a dynamic force driving the development of China, a major way of securing employment, and a key player in innovation. Since the 18th CPC National Congress, the PBC, along with other financial regulatory departments, has earnestly implemented the decisions and arrangements of the CPC Central Committee and the State Council, made the service for such businesses a top priority, made serious efforts in the planning and design of supportive financial measures, and improved the policy framework. In summary, we have taken on four major tasks:

First, innovative tools, or innovative structural monetary policy tools, have been an effective driving force. In particular, the PBC launched two direct tools to tackle the pandemic's huge impact on micro and small businesses. The amount of deferred repayments of principal and interest of loans taken out by micro, small and medium businesses has reached 13.1 trillion yuan, and the amount of inclusive credit loans taken out by micro and small businesses has reached 10.3 trillion yuan.
Second, the financing costs of micro and small businesses have been reduced by deepening the market-based interest rate reform. Since 2013, the PBC has eased regulation on loan and deposit interest rates, established and refined the mechanism for setting the LPR, and pushed for reducing the financing costs of the real economy. The interest rate of loans newly issued in April to micro and small businesses was 5.13%, lowering by nearly 1 percentage point over the past five years.

Third, a long-term mechanism has been established for financial institutions to serve micro and small businesses, with a focus on tackling difficulties and bottlenecks. We pushed financial institutions to set up inclusive financing departments, improved the mechanism for inclusive financing to be conducted by specialized institutions, pushed for the establishment of provincial-level credit platforms in most provinces, and pushed for the shared use of credit information of micro and small businesses. The coverage of financing of micro and small businesses have extended remarkably. As of the end of April, 51.32 million micro and small businesses have accessed inclusive credit granting, accounting for one-third of all market entities.

Fourth, the channels for diversified financing have been broadened so as to improve the availability and convenience of financing of micro and small businesses. As of the end of April, a total of 1.78 trillion yuan in financial bonds have been issued with the aim of facilitating such businesses. The accounts receivable financing service platform has supported micro, small and medium businesses through 280,000 financing deals, with the amount totaling 12.5 trillion yuan.

The difficulties and high costs to access financing for micro and small businesses have been tackled through common effort and remarkable results have been achieved. As of the end of April, the balance of micro and small business loans nationwide was 38.8 trillion yuan, 3.35 times that at the end of 2012.  

Going forward, the PBC will stay committed to consolidating and developing the public sector of the economy and to encouraging, supporting, and guiding the non-public sector of the economy. We will continue to offer supportive policies at an earlier time and with moderately enhanced efforts. We will systematically build a long-term mechanism so that financial service providers are confident, willing, able and efficient to grant loans to micro and small businesses. With these efforts, the continued and healthy development of the national economy will be boosted. Thank you.

Shou Xiaoli：

Thank you for the speakers and the journalists. Today's news conference is concluded.