Chinese Central Bank Calls for Stronger Macro-prudential Regulation of Online Finance at Inaugural Work Meeting for 2021

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The People’s Bank of China (PBOC) has sent a raft of key policy signals at its inaugural work meeting for 2021, including a push for green finance, the heightened macro-prudential scrutiny of online financial activities, deeper participation in global financial regulation, and further internationalisation of the renminbi.

The full list of policy focal points in 2021 highlighted by the PBOC work meeting held on 4 January included:

  1. Stable monetary policy which is flexible and targeted, and attendant rational adjustments. “Improve money supply adjustment mechanisms, maintain basic consistency between growth in the broad money supply and total social financing and nominal economic growth.”
  2. Continue to effectively employ structural monetary policy tools and lending policy for targeted irrigation. “Continue to implement the monetary policy tools of deferrals for micro and small-enterprise loan payments and micro and financial inclusion micro and small-enterprise loans. Continue to employ financial inclusion re-loan and re-discount policies.”
  3. Implement major decisions and policies for peak carbon and carbon neutrality. “Improve the green financing policy framework and incentive mechanisms…strengthen the ability of the financial system to deal with climate-change related risks, and drive the establishment of the emissions trading market as a means of rational pricing for emissions.”
  4. Accelerate improvements to the macro-prudential policy framework, include major financial activities, financial institutions, financial markets and financial infrastructure within macro-prudential regulation. “Strengthen monitoring and assessment of systemic financial risk, gradually drive the establishment of a macro-prudential pressure monitoring system. Accelerate the establishment and improvement of macro-prudential regulatory frameworks for key areas including cross-border capital flows. Improve the financial holding company regulatory system.”
  5. Continue to prevent and dissolve financial risk. “Strengthen risk removal and risk response, improve long-term mechanisms for risk disposal. Strengthen payments sector regulation, require that personal credit operations be licensed, strictly prevent excessive sales of financial products, and strengthen macro-prudential regulation of the financial activities of Internet finance platforms.”
  6. Deep participation in global financial regulation, strict prevention and control of external financial risk, gradual expansion of bilateral financial opening. “Appropriately respond to low revenue national debt issues, further expand high-level opening of the financial sector. In-depth participation in global financial regulation, and pragmatic maintenance of multi-lateralism.”
  7. Steady and prudent progress of internationalisation of the renminbi. “With a focus on servicing the real economy, expedite the convenience of trade and investment. Improve policy systems in relation to usage of the renminbi, continue to drive high-quality bilateral opening of financial markets. Expedite positive, coordinated development of offshore and and onshore markets for the renminbi and foreign currencies.”
  8. Deepen reform of financial markets and financial institutions. “Take the lead in formulating bond market development plans, drive improvements to the bond market legal system, expedite the interconnection of infrastructure. Improve multi-channel bond default disposal mechanisms. Drive improvements to the unified law enforcement framework for the bond market, expand the vigour of punishment for illegal conduct on the bond market, including absconding from debt and fraud. Implement a real estate finance macro-prudential regulatory system, improve the policy system for financial support for residential leasing.”
  9. Continue to improve foreign exchange regulation and service. “Implement opening of the capital account in a steady and orderly way. Support enterprises in the rational and prudent usage of foreign exchange derivatives to manage exchange rate risk. Accelerate improvements to the ‘macro-prudential + micro-regulation’ twin pillar regulatory framework for the foreign exchange market. Strike against illegal foreign exchange conduct with a zero tolerance attitude.”
  10. Raise the financial services and regulatory level. “Drive the establishment of the financial legal system, further raise the influence of the research work of the central bank. Properly perform research and formulation work for the key financial contents of the 14th Five Year Plan and the financial sector 14th Five Year Plan. Pragmatically drive overall statistical collection for the financial sector, improve the establishment of a modern central bank accounts system. Deepen modernisation of the regulation of the payments sector, raise the level of application and management of fintech. Appropriately undertake trials and testing of the digital renminbi. Deepen the application of credit ratings to digital finance and economic regulation. Raise the efficiency of anti-money laundering inspections and work.”

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