zhou xiaochuan : supporting the efforts of energy conservation and reduction of pollutant emissions through financial markets abstract of an article by mr zhou xiaochuan, governor of the people ’ s bank of china, published in green leave magazine. * * * energy conservation and eco - environment protection were basic conditions for a healthy and sustainable economic development, an important content of promoting harmonious relations between the human beings and the nature and establishing a socialist harmonious society as well as a reflection of the principles of “ put the people first ” and scientific development approach. the communist party of china ( cpc ) central committee and state council attached great importance to the work of energy conservation and reduction of pollutant emission by making a series of important policies and arrangements. in may 2007, the state council issued the comprehensive work plan for energy conservation and reduction of pollutant emission to stress the importance of the work and focus on relevant policy implementation. in june, the state council established a leadership group on energy conservation and reduction of pollutant emission, headed by premier wen jiabao. it shows that energy conservation and reduction of pollutant emission has become a top priority for our work. financial industry should improve financial services to energy conservation and reduction of pollutant emission and carry out the instructions laid in the videoconference of the state council. additionally, financial industry should strengthen awareness of social responsibility and risk prevention, establish effective information mechanism, provide market and policy support to production capacity allocation appropriate with environment endurance, reduce price distortion so that market can play a fundamental role and encourage industrial structural upgrading and a shift of economic growth model through financial market. i. highlight financial industry ’ s social responsibility and risk prevention awareness in environment protection, energy conservation and reduction of pollutant emission in spite of rapid economic growth and magnificent achievements in economic development in recent years, we have paid high costs in terms of resources and environmental degradation, conflicts between economic development and resource and environment have become increasingly poignant and people have strong complaints about environment pollution. this is directly related with unreasonable economic structure and extensive growth mode. if we don ’ t accelerate economic restructuring, shift economic growth mode, the economic development will be unsustainable. in the global compact, proposed by secretary general mr. koffi annan and initiated by the un in 2000, social responsibilities of enterprises on environment were clearly stressed and enterprises should prepare for environmental challenges and share more responsibilities in regard of environment protection, and encourage application of environment - friendly technologies.

macro balances. however, our practical experience with the use of this tool in the 1990s taught us that its success in taming capital inflows is limited because it is always possible to find ways to circumvent the restrictions. even though we do not consider it particularly attractive ( since we have an open capital account ) or efficient – and those are the reasons why we have not used it in the last 15 years – its use cannot be ruled out under exceptional circumstances. our powers as a financial regulator also include other dimensions that some countries have used as part of their prudential toolkit. for instance, the cbc determines the level of reserves to be kept by banks that take deposits from the public during an operating cycle ( reserve requirement ) and the interest yield of such resources. several jurisdictions ( e. g. china and peru ) have controlled credit growth and currency composition by imposing differentiated reserve requirements. moreover, the cbc has the authority to regulate the relations that should exist between assets and liabilities of commercial banks, which have led to our standards of liquidity and market risks. in a nutshell, our current regulatory and legal framework, as well as the actions of financial regulators and supervisors, including the central bank of chile and the superintendency of banks and financial institutions, contains elements that are consistent with a financial stability and macroprudential approach, and grants powers that may be used with these purposes if deemed necessary. 5. final thoughts the recent financial crisis was a reminder, especially for the developed world, of how costly a financial crisis can be and how important it is to minimize their probability of occurrence and costs, by explicitly safeguarding financial stability. although this concern has been present for quite some time in many central banks, including the central bank of chile, the international debate has stressed the need to have a macroprudencial policy framework in place, with its own tools to tackle this objective. countries have already begun to consider this framework as one of the pillars that sustain a good economic policy. having been spared a crisis or acute stress from a financial crisis since the early 1980s, and in particular after the latest crisis, has allowed us to watch this debate with prudence and pragmatism, without needing to take hasty policy measures. we already have some of them in place, but as the international debate on these policies is settling and the evidence about bis central bankers ’ speeches the efficiency and costs of different tools accumulates, it will be important that we