yi gang : welcome address - tenth lujiazui forum welcome address by mr yi gang, governor of the people's bank of china, at the tenth lujiazui forum, shanghai, 14 june 2018. * * * secretary li qiang, vice chairman zhou xiaochuan, distinguished guests, ladies and gentlemen, good morning! it is a great pleasure to join friends both old and new at the 10th lujiazui forum, which is jointly organized by the people ’ s bank of china ( pbc ), china banking and insurance regulatory commission ( cbirc ), china securities regulatory commission ( csrc ) and shanghai municipal people ’ s government. on behalf of the organizers, i would like to extend a warm welcome to you all! this year marks the 40th anniversary of china ’ s reform and opening - up. the development of socialism with chinese characteristics has entered a new era, and china ’ s economy has been transitioning from a phase of rapid growth to a stage of high - quality development. the city of shanghai is an international financial center with a rich history of financial sector development and a full - fledged, sound financial market system, and has been a pioneer in china ’ s financial reform and opening - up. the development as international financial center is an important mission that the party central committee and state council has entrusted to shanghai, based on the overall arrangements of china ’ s reform, opening - up and modernization. in recent years, shanghai has made steady progress in a series of financial pilot programs including the reform measures adopted in the pilot free trade zone, cross - border use of rmb, shanghai - hong kong stock connect, bond connect, and crude oil futures, and has, in these valuable experiments, accumulated replicable and expandable experiences for financial reform and opening - up in the country. therefore, the theme of this forum as “ shanghai ’ s development towards an international financial center in the new era ” is of great significance. on april 10 this year, secretary - general xi jinping pointed out at the boao forum for asia that china will continue its fundamental national policy of opening - up, and that the door of opening - up will never shut and will only open wider. meanwhile, he also stated that china will significantly broaden its market access, including in the financial sector. the pbc has attached importance to and supported the development of shanghai as an international financial center. going forward, the pbc will implement the decisions and arrangements of the

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