China's central bank emphasizes increasing monetary, credit issuance, reducing social financing costs

An official from the People's Bank of China on Saturday underscored the importance of increasing monetary and credit issuance and implementing various measures to further cut the cost of social financing.

At the Annual Conference on China's Economy 2024-2025, organized by the China Center for International Economic Exchanges (CCIEE), Wang Xin, director of the research bureau at the People's Bank of China, said the monetary policy has remained supportive to ensure stable economic performance this year.

The annual Central Economic Work Conference, held in Beijing from Wednesday to Thursday, emphasized the need to implement more proactive and effective macroeconomic policies and send a strong and positive policy signal to the market. It is crucial to accurately grasp the moderately loose monetary policy for the upcoming year, Wang noted.

"Overall, next year's moderately loose monetary policy will be moderately strengthened based on this year's supportive stance. There will be a moderate increase in both aggregate and structural support of monetary policy, appropriate reductions in reserve ratios and interest rates, increased monetary and credit issuance, and intensified support for key strategic areas, key sectors, and weak links. Therefore, financing conditions for the real economy will become more accommodating, effectively meeting development needs and aiding in achieving an optimal combination of steady growth, stable employment, and reasonable price increases," Wang said.

In the next phase, monetary policy needs to increase its overall intensity to fully meet the effective financing demands and direct funds towards the real economy, according to the official.

"On the liquidity front, currently, the average reserve requirement ratio in China is 6.6 percent. There is further room for reserve ratio cuts. The central bank's exploration into secondary market trading of government bonds has also matured. To effectively utilize a variety of monetary policy tools, provide ample medium- to long-term liquidity, and maintain sufficient liquidity in the banking system, it is necessary to guide banks to strengthen project reserves, increase credit issuance, and strive to align the growth of the social financing scale and money supply with economic growth and expected targets for the overall price level," Wang said.

In the next phase, efforts will be made to fully leverage the effectiveness of loan rate reforms and take multiple measures to further reduce the cost of social financing, according to the official.

Wang stated that over the next five years, the scale of local hidden debt replacement will reach 10 trillion yuan (around 1.4 trillion U.S. dollars). Meanwhile, the reform and risk reduction of small and medium-sized financial institutions in various regions and the disposal of non-performing assets are also being further promoted.

When these measures are implemented, they will objectively reduce the growth rate of the total financial volume. But ultimately, this is a positive development. It helps to loosen debt chains, enabling local authorities to unload their burdens. Additionally, it aids in enhancing the asset quality of financial institutions, maintaining financial stability, and facilitating economic circulation, he said.

"The financial aggregate will maintain a relatively rapid growth. On the other hand, we should not underestimate the positive effects of putting existing resources to better use. Research estimates that in the first three quarters of this year, the loan issuance by major financial institutions exceeded 110 trillion yuan (around 15.1 trillion U.S. dollars), an increase of nearly eight trillion yuan (around 1.1 trillion U.S. dollars) compared to the same period last year and nearly 20 trillion yuan (around 2.7 trillion U.S. dollars) compared to the same period in 2022. And 70 to 80 percent of the existing loans each year need to be recovered and reissued. During the extensive process of recovery and issuance, the credit structure will be steadily adjusted and optimized, injecting new impetus into the high-quality development of the economy," Wang said.

China's central bank emphasizes increasing monetary, credit issuance, reducing social financing costs

EU is employing double standards in its electric vehicle (EV) policies, unfairly targeting Chinese EV imports with tariffs and subsidies, according to experts at the 17th Forum on WTO Laws and China opened in Guangzhou City of south China's Guangdong Province on Saturday.

One of the highlights was the release of a blue book titled "The EU's Industrial Subsidy Policy for Lithium Batteries, PV Products and Electric Vehicles in the Name of Green Transition", which claims that while continuing to impose anti-subsidy tariffs on imported Chinese electric cars, the EU is subsidizing domestic EVs, lithium batteries and photovoltaic products.

Shi Xiaoli, the book's lead researcher, claimed that while the EU restricts state aid that might cause market distortions, numerous exemptions still exist, which ultimately allows subsidies across these three sectors.

"For example, one of the exemptions is that even if a subsidy in a certain country distorts the EU market, even significantly, if it still aligns with the EU's long-term common interests, it can remain. The scope of European common interest projects is continuously expanding, and it includes these three industries," said Shi Xiaoli, Director, WTO Law Research Center.

The book reveals that EU member states heavily subsidize electric vehicles, with substantial support covering the entire industrial chain.

At the same time, the EU has recently introduced new tariffs of up to 35 percent on imported Chinese EVs. That's in addition to the existing 10 percent duty, which some experts deemed as counterproductive.

"We believe this policy is discriminatory. The EU acknowledges that Chinese electric vehicles have caused no harm to its EV sector. The EU's trade protectionist measures are in fact more detrimental to itself. While it may protect its market in the short term, once these measures are lifted, its technology and other aspects may fall even further behind," said Sun Xiaohong, secretary-general of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME).

A lawyer at the event argued that the EU's actions are not typical trade measures, but an attempt to curb China's EV sector growth.

"Subsidies for emerging industries exist in every country, including the United States and the European Union. Also, this time the European Commission initiated the case on its own authority, marking the first use of a special legal rule in the anti-subsidy investigation against Chinese export enterprises," said Pu Lingchen, Partner, Chance Bridge Law Firm.

The EU has given itself quite the ambitious goal - starting in 2035 all new cars sold will be emissions free.

Those involved in crafting of the blue book believed that EVs will be crucial in achieving this target. But they have also said that if Chinese imported EVs come with a higher price tag, then the EU's ambitious plan will certainly face difficulties.

Chinese think tank criticizes EU's double standards on electric vehicles