Yi Gang (易纲) has made his first appearance at the Boao Forum for Asia following his recent appointment as governor of the People’s Bank of China, flagging the continuation of stable monetary policy and further opening of the financial sector at the “Monetary Policy Normalization” forum.
On interest rates, PBOC’s balance sheet and monetary policy
“At present, China has cautious and prudent monetary policy. We do not have any quantitative easing or zero interest rate policies.
“Major central banks are now beginning to tighten interest rates, beginning to withdraw from expansion, as well as implementing balance sheet reductions…we have already undergone these changes for a long period of time now, so we have already properly prepared for these kinds of changes.
“As a major central bank, we must start to tighten. The Chinese central bank will continue to implement stable monetary policy, and the interest rate spread between China and the United States will remain within a comfortable range.”
On financial opening
Yi Gang said that he expects “financial opening measures to mostly be in place by 30 June of this year.”
“Further opening of the financial sector and exchange rate mechanism reforms will be mutually coordinated, the financial regulation capacity will match the level of opening, and over the next several months we will implement six financial sector opening measures, allowing foreign banks to establish branches and subsidiaries domestically.
“[We will ] regulate both domestic and foreign-invested financial institutions in a prudent and egalitarian manner, and China will strengthen financial regulation during the process of market opening.”
“[We will] greatly expand the scope of foreign invested bank operations, not set exclusive restrictions on the operations of foreign invested securities firms, and cancel the requirement that foreign invested insurance companies establish representative offices two years prior to establishment.
“Certain opening measures for the financial sector and services sector that were announced previously are now being advanced in an orderly fashion.
“For example, we previously announced that restrictions on the market entry of bank card companies, settlement companies and non-bank payment organisations would be relaxed; the relaxation of restrictions on foreign-invested financial services companies undertaking credit assessment services, as well as the application of equal treatment to foreign invested investment and credit information organisations.
“The implementation of these measures that have already being announced is currently being firmly advanced.”
On the benchmark interest rate
“The benchmark interest rate in future will possibly be mainly determined by the market. The two tracks of China’s benchmark interest rate and the market rate will be combined to formed a single marketised rate.”
On capital markets and Shanghai-London Connect
Yi Gang hopes that the Shanghai-London Stock Connect initiative to link the stock exchanges of both cities can be implemented prior to the year’s end.
In order to further improve the Shanghai-Hong Kong Stock Connect initiative, Yi announced that starting from 1 May of this year the daily volume for the program will be expanded four-fold.
According to Yi the Shanghai-Hong Kong Stock Connect’s annual volume will be increased to 52 billion yuan, from 12 billion yuan previously.