of more moderate rises in food and energy prices, which had shown exceptionally large increases in 2000. more fundamentally, the slowdown in inflation was related to the moderate rise in unit labour costs over the past two years. in our monetary policy committee statement we noted that with continued fiscal and monetary discipline, the target range of inflation in the year 2002 was achievable. the rate of imported inflation in production prices has declined from 15 per cent year - on - year in december to 11, 8 per cent in may. inflation in domestically produced goods slowed from a year - on - year rate of 8 per cent in november 2000 to 7, 5 per cent in may. this was largely because of declining food prices which had a positive impact. similarly, the headline cpi accelerated from 1, 7 per cent in october 1999 to 7, 8 per cent in february 2001 but declined to 6, 4 per cent year on year in may. although we remain reasonably confident of meeting our inflation target, we nonetheless remain vigilant. there are some forces at work that may obstruct the gradual decline we have witnessed up until now. these include the faster growth in aggregate demand over output, uncertainties about the stability of the oil price, and possible delayed second - round effects from the rand ’ s depreciation of last year. although the rand depreciated by 1, 3 per cent during the first quarter of this year, it appreciated by 1, 2 per cent against the basket of currencies during the second quarter. against the dollar the rand depreciated by 5, 9 per cent in the first quarter. however, during the second quarter, the rand depreciated against the dollar by only 0, 6 per cent. 5. exchange rate of the rand having declined from a level of about r7, 50 against the us dollar early in january 2001 to levels around r8, 00 at the end of may, the rand seemed to stabilise against the us dollar in june. the monthly average exchange rate of the rand against the dollar in june 2001 was r8, 05. however, from 3 july 2001 the rand weakened against the us dollar to a level of r8, 2403 on 9 july reaching an all time low of r8, 2456 in intra - day trading. subsequently the rand declined further to a level of r8, 34 on 11 july 2001. since the beginning of the year, the rand has depreciated by about

pandemic, bank npls will edge up. in this sense, strengthening disposal of non - performing assets is crucial for enhancing the sustainability of banks ’ support for the real economy. this is also an important aspect of the financial sector to bear the costs of the real economy, which is deemed as the financial sector ’ s contribution to the real economy. we believe that the financial support policies in response to the covid - 19 are phased policies. therefore, regarding policy design, focus should be placed on ensuring incentive compatibility and fending off moral hazards. we should pay attention to the “ aftereffects ” of the policies, keep the aggregates at appropriate levels, and consider in advance the reasonable timing of exit for the policy tools. fourth, we achieved effective money and credit growth while keeping the pbc ’ s balance sheet basically stable. the pbc has lowered the rrr ten times since 2018, releasing about rmb8 trillion of liquidity and bringing the average rrr down from 15 percent to the current nine percent. a reduced rrr will correspondingly increase the money of commercial banks at their disposal and thus boost the money multiplier. the process of rrr cuts, on one hand, was reflected in the shrinking of the pbc ’ s balance sheet. on the other hand, it was reflected in the monetary expansion effect, as commercial banks could issue more loans. in the meantime, however, the pbc “ expanded its balance sheet ” by increasing the scale of central bank lending, central bank discount and adopting other monetary policy instruments. rrr cuts and scale rise in central bank lending are both expansionary monetary policy tools, yet when reflected in the pbc ’ s balance sheet, the former leads to balance sheet shrinking while the latter results in balance sheet expansion. in recent years, the values of the pbc ’ s balance sheet shrinking and expansion have been basically equivalent. therefore, the size of the balance sheet has been kept basically stable at around rmb36 trillion. this mechanism differs from those of the world ’ s major economies, whose central banks substantially expanded the size of their balance sheets. however, the commercial banks in china have been expanding their balance sheets in a continuous and reasonable manner, with loans growing relatively rapidly. this demonstrates the improved efficiency of monetary policy transmission and the sound functioning of market mechanism. thank you! 3 / 3 bis central bankers'speeches