of the underlying securities falls. investors ’ actions to seek attractive returns lead to lower borrowing costs for households and businesses. does the possibility of attractive returns for talf investors mean that the federal reserve is taking on large credit risks? i think the answer is a clear “ no, ” principally because the returns earned by investors primarily are due to the absence of sufficient private balance sheet capacity rather than underlying credit risk. in fact, from the federal reserve ’ s perspective, the risk of loss is very low. indeed, there are three layers of protection that stand between the federal reserve and losses. first, the underlying securities are aaa - rated, which means that losses on the underlying loans have to be unusually large to move that high up in the capital structure. and although some of the rating agency models have not held up well in the crisis, the consumer abs models have proven to be reasonably robust. in other words, a aaa - rating still means quite a bit in this market. this is in contrast to the collateralized debt obligation or cdo market, where aaa - rated securities often used subprime and alt - a mortgage loans as their raw ingredient. second, as noted earlier, the fed has taken additional haircuts against the underlying securities averaging about 10 %. these haircuts provide additional protection to the fed. third, if the underlying collateral is put back to the fed, the fed puts the collateral into a special purpose vehicle. in such a situation, the fed would be protected by the excess spread earned on the talf loans and treasury - provided tarp capital. only if those buffers were wiped out, would the fed suffer losses. we have done stress simulations on the underlying loans. we think it is unlikely that the treasury will lose money on this program, and it sits ahead of the fed in terms of its loss exposure. the risk posed to the federal reserve therefore seems quite remote. instead, we expect that the program will be profitable for the taxpayers and will be successful in pushing down yields and increasing credit availability. turning from the issues of design and risk to issues concerning implementation and effectiveness, we have been rolling the talf out in stages – first the consumer abs market, with the first subscriptions for talf loans in march ; second, new cmbs securitizations that will start in early summer ; and third, legacy cmbs and, possibly legacy rmbs, later this summer. by legacy assets, we mean highly - rated existing securitized

33 % year on year to 16 trillion yuan, 22 percentage points faster than the average. monetary policy is also focusing on small - and - medium enterprises and vulnerable groups hit by covid. as of end - march, the balance of inclusive lending to mid -, small - and micro - businesses grew 25 % year on year to 21 trillion yuan. recently, the pboc announced 23 policy measures for supporting the real economy, including providing assistance to people hard hit by covid - 19. the accommodative monetary policy helped to ensure a sound economic start in q1 2022. the chinese economy grew by 4. 8 percent in q1 2022, a slight improvement from q4 2021. consumer price index stayed within a moderate range. cpi right now is 1. 1 percent in q1 and producer price index is 8. 7 % recently. price stability is our policy priority. grain production and energy supply are crucial for price stability this year. agricultural production, and the production and import of key energies, such as coal, oil and gas are the focus of financial services. as long as grain production and energy supply remain stable, inflation will be kept within a reasonable range. to sum up, china's monetary policy is accommodative and is in a comfortable range. we also stand ready to support small and medium enterprises with more instruments if needed. so with that outlook, certainly we have accommodative monetary policy supporting our real economy throughout this year. thank you. date of last update apr. 22, 2022