crisis, joint stock reform of state - owned commercial banks enhanced their overall strength and resilience and strengthened the foundation for financial stability. third, the financial legislation system and supervision ability has improved. fourth, the financial market, including delivery of services and product innovation, was not sophisticated, and this helped ward off crisis. currently, china ’ s financial system faces the challenge of guarding against systemic risks. on one hand, to address deep - rooted problems in the economic structure and the uneven and unbalanced growth, it is necessary to adopt sustainable and sound macro - economic policies ; the expansion of domestic credit supplies remains strong and cross - border capital movement contains potential risks. excessive liquidity, inflation, asset price bubbles, periodic non - performing loans and other risks may build up and undermine asset quality and resilience of china ’ s financial sector. one the other hand, in the past few years, many financial institutions are offering cross - sector and cross - market products ; financial share - holding companies have established complex internal structures and moved into diversified businesses ; new - type of financial institutions are heavily involved in the financial market activities. given china ’ s domestic situation, the stability of the financial system and macroeconomic policies are directly related. due to the large share of bank credit in total financing, there is a close relationship between fluctuation of credit supply and economic cyclical change on one hand and systemic financial risks on the other. therefore, the establishment of counter - cyclical adjustment mechanism is our priority in strengthening macro prudential policy. the people ’ s bank of china, with a mandate in china ’ s macro - economic management and financial stability, needs to build a counter - cyclical adjustment mechanism to increase flexibilities in macro - economic management. meanwhile, it is necessary to strengthen monitoring on systemically - important financial institutions to prevent and properly manage potential systemic risks. macro - prudential policy is a relatively new concept in china. to avoid misunderstanding and simplification of it as just capital requirement, capital buffer, liquidity, leverage, etc, first of all, we need to clarify its essential meaning, framework and concrete content. in general, firstly macro - prudential policy is counter - cyclical. secondly, it needs to deal with market failure such as herding phenomena to enhance financial market soundness and prudence of market participants. thirdly, along with globalization, rapid expansion of financial market, increasing complex financial instruments and trading, it is necessary to

country it was clear what the desired fiscal response should be. the ecb expanded its quantitative and credit easing instruments, as reflected by the strong growth of its balance sheet. this provided space to governments to increase fiscal spending, without triggering severe stress in sovereign bond markets. in fact, the aggregate discretionary fiscal stimulus in the euro area in 2020 has been estimated to be more than 4 % of gdp. by comparison, the global financial crisis prompted a discretionary fiscal stimulus of about 1. 5 % of gdp. i think this response to the covid crisis offers important lessons for the fiscal architecture in the euro area. the successful coordination of fiscal and monetary policy was in great part due to the enormity of the economic threat as well as its symmetric nature. from the outset it was clear that we needed an all - out response from both governments and central banks to shield households and firms from income loss and avoid irreversible damage to the economy. under these circumstances, policymakers decided to activate the general escape clause in the stability and growth pact. the activation of this clause temporarily lifted all restrictions on fiscal policy. this helped prevent undue procyclical fiscal consolidations, such as during the sovereign debt crisis. but shouldn ’ t an effective and concerted monetary and fiscal policy response also be possible under less dramatic circumstances than the covid crisis? and wouldn ’ t we be better off with a framework that allows for more effective macroeconomic stabilization policies without needing to have recourse to an emergency clause that in effect requires the suspension of all fiscal rules? and if the answer to both these questions is yes, how do we ensure that we maintain a balanced macroeconomic policy mix in the emu, during the current recovery phase and beyond? based both on theory and past experience, i think that, in order to make our monetary union more stable, we need a fiscal framework that enhances coordination between member states and allows for a better alignment of monetary and fiscal policy over the entire economic cycle. this requires sufficiently countercyclical fiscal policy also from a euro area wide perspective. not only in bad times or when persistently low interest rates limit the scope for conventional monetary policy. but also in good times, so that governments reduce debt levels to pay for stabilization policies in the future. repair the roof when the sun is shining, an integral element of countercyclical stabilization policy that often gets overlooked. an enhanced ﬁscal framework to ensure stability of the emu as a central