zhou xiaochuan : learn lessons from the past for the benefit of future endeavour speech by mr zhou xiaochuan, governor of the people ’ s bank of china, at the china bond market development summit, beijing, 20 october 2005. * * * ladies and gentlemen, it is a pleasure to attend the china bond market development summit. let me focus on china ’ s corporate debt and briefly summarize lessons from past experiences. corporate bond includes, among others, enterprise debt. the development of enterprise bond market has always had the attention of many. in the past, we made quite some mistakes in this field. thus our corporate bond market has been very sluggish. compared with some other financial instruments, and in the backdrop of a high savings rate and high proportion of m2 in gdp, china ’ s corporate bond market has been developing very slowly, and its role in economic growth has been rather limited. such lack of development has also distorted financing structure and produced considerable implicit risks, whose consequences may be grave for social and economic development. of course, past setbacks and mistakes had their roots in the specific circumstances of that time, i. e. in the early days of the transition when the economy was more planned than market - driven and market economy had yet to establish itself as a way of thinking and a general environment. therefore, a review of the past is not to find fault with anybody, but to draw lessons. the decisions on several issues of improving the socialist market economic system adopted by the 3rd plenum of the 16th cpc central committee has provided for enhancing direct financing, establishing a multi - layered capital market system, expanding debt market and encouraging the growth of institutional investors. only by thoroughly understanding and clearly analyzing the problems and mistakes in the past, can we find an effective solution and implement the decisions in a concrete manner. i. problems in enterprise bond development a number of serious mistakes were made in the early days of enterprise bond development, i. e. from the end of 80s until the first half of 90s. as a result, the development was wrought with setbacks and never fully recovered. a thorough discussion on this issue is necessary. here, i made a list of a dozen mistakes. 1. issue quota and number of issuers were planned and allocated. enterprise bond was not issued on a market basis. for example, quota was allocated by the government to the next level of government, from the state to the province, and then to the localities. 2. administrative

are different views. i would not qualify this as surprising or even negative as bis central bankers ’ speeches such. in the future, we will also always try to reach consensus. but sometimes we have to take decisions. you have mentioned the impact the ecb ’ s policy has on the euro. your colleague ewald nowotny made even more blunt comments by saying the aim was to weaken the currency. is the ecb also in this respect becoming more like other central banks, which implicitly use the exchange rate as an instrument? don ’ t you fear counter - measures by others? i have to contradict you : we have not taken a single decision which was aimed directly to the exchange rate. no one can say that. our monetary policy is targeted to domestic objectives. we are justified to do so because of the difficult situation of low inflation we are in. of course everybody knows that unavoidably there are consequences for the exchange rate. the devaluation of the euro is a collateral consequence of our policy. but what really matters is the domestic objective. not a goal for the exchange rate. we have not changed our policy in that respect. this reminds me of japan. in 2013 japanese leaders also said that the ultra - expansionary monetary policy was aimed at domestic targets and not to weaken the yen. at that time also european policymakers and central bankers doubted and criticized that. if you read the imf or the g20 statements, the japanese policy was always considered acceptable because it was directed towards understandable domestic targets. now the same applies to the euro area, although in a different scale : we are not in deflation and we will not be in deflation. in germany the ecb ’ s policy is heavily criticized. this will increase with the planned asset purchases. one concern is that the ecb takes risks on its own balance sheet which could at the end cause some problems for taxpayers again. isn ’ t it a big risk that the support in germany for the ecb could be get lost completely? this is of course a concern to us. we don ’ t live in an ivory tower. but we have a mandate and this mandate is for the 18 euro area countries as a whole. but i also think there are a lot of misunderstandings and unjustified fears in germany. just to give one example : when we started buying some government bonds for the first time in 2010, everybody was writing in germany about the forthcoming hyperinflation. this did