Jin Guanping: "Putting Me First" Implementing Monetary Policy Interest Rates | Cycles | Monetary Policy
Interest rate is the price of funds and plays an important guiding role in macroeconomic equilibrium and effective resource allocation. Recently, China's interest rate system has launched a "relay race" to lower interest rates, conveying to the market the firm determination of precise and effective monetary policy, strengthening countercyclical adjustment, and fully supporting the real economy.
Currently, it is necessary and feasible to lower interest rates. From a domestic perspective, in recent times, the growth rate of some economic indicators has slowed down, and the foundation for economic recovery is not yet stable. Further efforts are still needed to promote high-quality economic development. From a foreign perspective, the external environment is becoming more complex and severe, and global trade and investment are slowing down, directly affecting the process of China's economic recovery. In addition, the recent improvement in the cost of bank liabilities has also created space for a downward trend in interest rates, enhancing the financial system's ability to supplement capital and serve the real economy.
By mid year, steady growth had reached a critical moment of climbing over obstacles. We should continue to follow the decisions and deployments of the Central Committee of the Communist Party of China and the State Council, comprehensively use various monetary policy tools, maintain reasonable and sufficient liquidity, maintain a moderate and stable total amount of monetary credit, promote the comprehensive financing cost of the real economy to be stable and reduce, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
Firstly, always adhere to the concept of prudent regulation. In recent years, there have been many unexpected shocks both domestically and internationally. Monetary policy has always adhered to a prudent orientation, with both quantity and price being moderate and relatively stable. It has responded to multiple shocks from both internal and external sources and achieved good regulatory effects. In the past five years, the average annual growth rate of China's broad monetary and social financing scale has been around 10%, which is basically in line with the annual growth rate of nearly 8% of nominal GDP, promoting macroeconomic stability and fundamentally conducive to maintaining financial stability.
Secondly, I am the main focus and prioritize domestic goals. China is a super large economy and must mainly adjust its monetary policy based on the domestic macroeconomic and price situation. Since last year, major central banks around the world have continued to raise interest rates significantly. Considering the weak overall demand of China's economy at that time, the People's Bank of China not only did not simply follow the interest rate hikes, but also guided open market operating interest rates to a cumulative decline of 20 basis points twice. The market quoted interest rates for loans with a maturity of 1 year and over 5 years have decreased by 15 basis points and 35 basis points respectively.
Once again, adhere to the principle that exchange rates are determined by the market and create conditions for me to be the main player. The lack of flexibility in exchange rate mechanisms is an important reason for constraining monetary policy autonomy and leading to economic and financial fragility at the macro level. Therefore, we must adhere to the principle that the RMB exchange rate is determined by market supply and demand. A flexible exchange rate formation mechanism creates conditions for enhancing the autonomy of monetary policy, helps to timely release external pressure, and expands the space for domestic monetary policy to be mainly regulated by ourselves.
Finally, innovate and utilize structural monetary policy tools to accurately and effectively support key areas and weak links. To meet the inherent needs of high-quality economic development, structural monetary policy focuses on key areas, is reasonable and moderate, and has both progress and retreat. It is embedded with market-oriented incentive mechanisms, which can fully mobilize the enthusiasm of financial institutions and accurately and effectively strengthen financial services in key areas such as inclusive small and micro enterprises, technological innovation, and green development.
The precise and effective implementation of a prudent monetary policy is the overall direction of monetary policy, but the specific use of policy tools requires comprehensive consideration and careful decision-making. Next, in response to changes in the economic situation, we need to coordinate growth and prices, and adjust monetary policy tools in a timely and moderate manner; Coordinate short-term and long-term, strengthen cross cycle regulation and countercyclical regulation, and adhere to monetary policy that does not flood or release large amounts of income; Balancing international and domestic perspectives, with a focus on domestic regulation, closely monitoring international trends, and strengthening expected management.
