China’s Top Financial Regulators Outline Key Policy Themes for Rest of 2020


China’s senior-most economic and financial policymakers have sent key signals on their intentions for the remainder of 2020 via a raft of media interview at the outset of August.

In an interview with the Chinese Communist Party’s People’s Daily on 10 August, People’s Bank of China (PBOC) governor Yi Gang (易纲) said that key focal points for central bank policy in the second half would include:

  • Supply-side structural reforms,
  • Maintaining overall macro-moderation and rational growth,
  • Endeavouring to stabilise enterprises and protect employment,
  • The prevention and dissolution of major financial risk, and
  • The acceleration of the deepening of financial reform and opening.

Yi Gang has also repeatedly reference in other interviews and official statements to “more flexible moderation, targeted guidance and integrated use of multiple tools” when it comes to Chinese monetary policy.

Ministry of Finance chief Liu Kun (刘昆) said that a major test for China would be how to “effectively manage and use” 3.75 trillion yuan in funds raised via the issuance of local government special bonds in 2020 – a quota 1.6 trillion yuan ahead of the figure for last year.

Liu said the focus would be on optimisation of investment and accelerating the schedule of usage, as well as the implementation of full process monitoring of special bond issuance and usage via IT systems.

Ning Jizhe (宁吉喆), deputy head of the National Development and Reform Commission (NDRC), said that China currently has “basic conditions” for a recovery of economic growth, although it continues to face major challenges, including the impact of the COVID-19 pandemic abroad alongside structural, systemic and cyclical issues at home.

Ning called for “maintaining the continuity and stability of macro-economic policy and raising its effectiveness, and acceleration of the implementation of various policies that have already been unveiled and deployed.”

With regard to Chinese monetary and fiscal policy, Ning said that there was still “space for required reserve and interest rate reductions,” as well as “space for increases to central government and policy finance leverage.” Ning called for “active fiscal policy to be more active”

Ning also highlighted the need for China to “firmly implement strategies to expand domestic demand,” given its 1.4 billion strong population and middle-income demographic of over 400 million.

To this end China will “actively expand consumption demand, implement consumption policies, guide the direction of consumption, improve the consumption environment, and raise consumption capability.”

Official data indicates that the recovery of Chinese consumption has lagged behind other key indicators following the domestic containment of COVID-19. In June consumption growth was -1.8%, for a decline of 9.8 percentage points compared to the same period last year.

China’s per capita consumption expenditures as a share of disposable income stood at 62% for the first half of 2020, for a decline of 8 percentage points compared to the same period in 2019.

China is also expected to make stabilisation of employment a key focal point for policy work, with official data indicating that the nationwide urban unemployment rate was 5.7% in June, for the second consecutive month of decline.

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