Yi Gang: Speech - Giving full play to finance and promoting more
efficient and resilient economic development
Keynote speech by Mr Yi Gang, Governor of the People's Bank of China, at the Annual
Conference of Financial Street Forum 2021, 20 October 2021.
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Ladies and gentlemen,
Dear friends,
Good afternoon!
It gives me great pleasure to attend this year's Financial Street Forum. This time the theme is
"Economic Resilience and Financial Accomplishments". I would like to share with you my
observations on this topic.
First, the system and mechanism of socialist market economy is the source and
In the socialist market economy,
fundamental guarantee for China's economic resilience.
and under the leadership of the Communist Party of China (CPC), there are hundreds of millions
of market entities with clear property rights. With hard budget constraints, these market entities
work hard to create value for the society and provide products and services needed by the
society. In this sense, each of them is competitive; otherwise, they are already out of business. It
is these market entities who fuel the unceasing development of China's economy.
When the economy reeled from external shocks, these market entities manifested strong
resilience. They flexibly adapted their production and operation arrangements to prices, orders,
workforce and raw materials. Yet on many occasions, what they faced was more fierce market
competition and even life-or-death stakes. Therefore, with commitment to the CPC's basic lines,
we focus on the central task of economic development, adhere to the Four Cardinal
Principles, continue to reform and open up, and we make improvements to the socialist market
economic system. In this way, fundamental guarantee is provided for continuously
vitalizing market entities and enhancing economic resilience.
The COVID-19 pandemic broke out in early 2020 and has lasted till now. And China's success in
responding to it is sufficient to demonstrate that our socialist market economic system is more
resilient than any other economic systems in the world. In terms of financial policies, the
People's Bank of China (PBC) launched monetary and credit policies in the amount of RMB300
billion, RMB500 billion and RMB1 trillion respectively last year to support market entities
and rolled out another RMB300 billion worth of central bank lending in September this year, which
were earmarked for the support of micro, small and medium-sized enterprises (MSMEs). Under
the socialist market economic system, these policies, be it monetary and credit ones, or fiscal
and other policies, have benefited hundreds of millions of market entities directly and
enhanced their vitality and resilience. In this way, market entities are enabled to create wealth for
the society while taking good care of themselves and their employees.
Since the beginning of this year, China has maintained stable economic development. The GDP
grew by 9.8 percent year on year in the first three quarters with the CPI rising moderately,
indicating that the goals set in the Government Work Report are attainable. Boasting advantages
such as large economic scale, complete economic structure, accelerated technological
innovation and sustained benefits from the reform, China will surely ramp up its economic
resilience, particularly along with the advantage of the socialist market economic system.
Second, under the socialist market economic system, the functions of finance are mainly
embodied in better allocating financial resources while continuously providing market
entities with financial services including risk management. To allocate resources is to guide
financial resources, such as loans, bonds, stock issuance and insurances, to flow to competitive
enterprises through pricing. In this way, various market entities including micro and small
businesses (MSBs) are funded to achieve healthy development. In the process, the financial
market will further discover and adjust prices. In recent years, thanks to the constant adjustment
of prices, the financing costs have been reduced for market entities, which could help address
a long-lasting problem, that is, difficulties in and high costs of financing for enterprises.
Meanwhile, financial inclusiveness has been improved as well.
In the process of price discovery, the economy also maintains strong flexibility and
resilience, thanks to its inherent self-adjustment mechanism. For example, some time ago when
electricity shortage occurred, this mechanism responded immediately, and coal and electricity
prices were adjusted correspondingly. For this, the National Development and Reform
Commission (NDRC) has proposed that we should accelerate the market-oriented reform of the
electricity price and allow a floating range of 20 percent in the price. In this way, price will play its
role in guiding resource allocation, and supply and demand will strike a balance.
While allocating resources and discovering prices, financial products also have a role to play
in dispersing and managing risks. By offering risk management products, the financial
sector serves the real economy better. It is an important function of finance.
When the functions of finance are fulfilled under the market mechanism, the market will be be
more resilient and resource allocation will be more efficient. Each and every field will witness
resources flowing to the most competitive enterprises. Once prices are found unmatched, they
will be soon adjusted and risks will be dispersed, hence the entire system will be dynamic and
elastic, capable of adjusting and stabilizing itself.
Regarding the financial aggregate, we make the best of the situation and see that growth of
money supply and aggregate financing to the real economy (AFRE) basically matches the
nominal GDP growth. The aggregate policy is reasonable and the liquidity is sufficient. As for the
structure, we follow market rules and give full play to the guiding role of monetary and credit
policy instruments. While insisting on fair competition and equal treatment to all entities, we
bolster MSMEs as well as green and low-carbon development. At present, over 40 million market
entities have benefited from inclusive MSB loans. Financing is accessible to so many market
entities is really a highlight of China's economic resilience and proactive support from the
financial sector.
Beijing is home to numerous financial institutions and professionals, and it witnessed the
establishment of Beijing Stock Exchange just recently, so the city is well prepared to play a vital
role in implementing national financial reform measures and strengthening international financial
exchanges and cooperation. Under the guidance of Xi Jinping Thought on Socialism with
Chinese Characteristics for a New Era, following the guiding principle of the speech by Vice
Premier Liu He and the arrangements for financial work in Beijing made by Secretary Cai Qi, the
PBC will continue to support Beijing in its development as a national integrated demonstration
zone for greater openness in the service sector, a pilot free trade zone and a national financial
management center.
I wish the forum a great success. Thank you!