Yi Gang wrote an article in the People’s Daily: Promote the research and development of digital currency in an orderly manner

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People’s Daily reported on December 24 that the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China proposed “building a modern central bank system”, which pointed out the direction for the work of central banks in the new era. We must take Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era as the guide, adhere to the centralized and unified leadership of the Party Central Committee over the work of the central bank, and implement a representative central bank system through consolidation, so as to provide strategic support for starting a new journey of comprehensively building a modern socialist country.

The importance of building a modern central bank system

The People’s Bank of China was established in December 1948 and has exclusively performed the functions of a central bank since 1984. Since the 18th National Congress of the Communist Party of China, the Party Central Committee with Comrade Xi Jinping at the core has attached great importance to the work of the Central Bank. General Secretary Xi Jinping pointed out that “a thousand tactics, uncontrollable currency is a useless one”, “strengthening the overall supervision and interconnection of financial infrastructure”, “fight a tough battle to prevent and resolve major risks, with the focus on preventing and controlling financial risks.” It is necessary to improve the global competitiveness of the financial industry, expand the high-level two-way opening of finance, improve the economic and financial management capabilities and the ability to prevent and control risks under open conditions, and enhance the ability to participate in international financial governance.” This comprehensively and profoundly summarizes the connotation of the modern central bank system. The Fourth Plenary Session of the 19th Central Committee of the Communist Party of China proposed to build a modern central bank system from the perspective of promoting the modernization of the national governance system and governance capabilities. The Fifth Plenary Session of the 19th Central Committee of the Party is based on promoting high-quality development, overall development and safety, and making strategic arrangements for building a modern central bank system is of great significance.

Building a modern central bank system is a major task for advancing the modernization of the national governance system and governance capabilities. The financial system is an important basic system in economic and social development, currency is the foundation of finance, and the central bank is responsible for regulating the currency gate. Therefore, the modern central bank system is an important part of the modern national governance system. Under the modern credit currency system, if the central bank manages money well, it can play the positive role of currency in allocating resources across time and space, and promote the sustainable and healthy development of the economy; the central bank does not manage money well, and it is not the occurrence of currency oversupply leading to currency Inflation and asset bubbles are credit contractions and even economic and financial crises. Since the reform and opening up, my country’s central bank system has achieved important phased results, but it is still not mature enough and finalized. It is necessary to build a modern central bank system in accordance with the requirements of promoting the modernization of the national governance system and governance capabilities.

Building a modern central bank system is an inherent need to promote high-quality development. For a period of time, financial risk has become one of the major risks. Its formation is related to the fact that my country’s central bank system has not yet fully adapted to the high-level socialist market economic system. It is reflected in the fact that monetary policy is easy to loosen and difficult to tighten, and the efficiency of policy transmission is blocked by institutional mechanisms. The central bank’s inadequate overall supervision of systemic financial risks and other issues. At present, my country is turning to the stage of high-quality development. It is in a critical period of transforming development mode, optimizing economic structure, and transforming growth momentum. The modern central bank system needs to be used as an important support to support economic transformation and upgrading while preventing severe inflation or deflation. And systemic financial risks to ensure the smooth progress of my country’s modernization process and maintain national security.

Building a modern central bank system is an inevitable requirement to meet the challenges of the evolution of the international central bank system. From the perspective of the evolution of the international central bank system, the main task of the central bank was to raise funds from the government at first, and then it turned to specialize in currency management, and gradually established a modern central bank system that maintained currency stability by adjusting currency and interest rates. In the 1970s, global central banks began to pay attention to full employment. After the 2008 international financial crisis, they paid attention to financial stability and international coordination and cooperation. In our country, the People’s Bank of my country has been focusing on maintaining currency stability as its primary goal since it ceased to provide financial services to enterprises and individuals in 1984, and has been dedicated to the function of the central bank, and to promote economic growth. The goal of stability and international balance of payments, and in recent years has also attached importance to the goal of full employment. Under the profound background of the world’s unprecedented changes in a century, in order to respond to the evolution of the international central bank system, we must base on China’s national conditions, conduct scientific analysis and reference on the practices of international central banks, and accelerate the construction of a modern central bank system.

The Connotation of Building a Modern Central Bank System

The modern central bank system is the sum of the modern monetary policy framework, financial infrastructure service system, systemic financial risk prevention and control system, and international financial coordination and cooperation governance mechanism. The goal of building a modern central bank system is to establish a central bank system and mechanism that helps to achieve the four major tasks of currency stability, full employment, financial stability, and balance of payments, manage the currency gate, provide high-quality financial infrastructure services, and prevent Control systemic financial risks, manage external spillover effects, and promote the formation of a fair and reasonable international financial governance structure.

Improve the framework of modern monetary policy. The modern monetary policy framework includes an optimized monetary policy target system, an innovative monetary policy instrument system, and a smooth monetary policy transmission mechanism. Monetary policy takes the stability of the currency value as the primary goal and pays more attention to full employment. Enrich the monetary policy toolbox and improve the structural monetary policy tool system. Deepen the reform of interest rate marketization as a starting point to clear the monetary policy transmission mechanism and better serve the real economy. To achieve the goal of currency stabilization, the central bank needs to regulate the currency creation behavior of the banking system in a market-oriented manner, provided that the central bank can maintain a healthy and sustainable balance sheet. To this end, it is necessary to implement an independent central bank financial budget management system to prevent the monetization of fiscal deficits, to build a “firewall” between the two “pockets” of finance and the central bank, and to prevent the central bank’s balance sheet from assuming corporate credit Risks ultimately affect the credit of RMB.

Build a financial infrastructure service system. The central bank provides the most basic financial services for the financial system and society through financial infrastructure. Financial infrastructure is an important support for the central bank to achieve the four major tasks. Economic development and opening to the outside world contribute to the convenience, connectivity and safety of financial infrastructure services. It is necessary to continuously strengthen financial infrastructure construction, optimize structural layout, unify regulatory standards, and ensure safe and efficient operation.

Build a systematic financial risk prevention and control system. We have accumulated experience in the battle to prevent and resolve major risks and have formed several effective risk management models. However, the issue of moral hazard in financial supervision and risk management is still prominent, and market discipline, bankruptcy deterrence and punishment mechanisms have not yet been truly established . As the lender of last resort in the financial system, the central bank must earnestly fulfill its responsibility for preventing and controlling systemic financial risks in the entire process before and after the event. From the perspective of precautions, the first is to improve the macro-prudential management system to deal with the procyclical behavior of financial institutions and the cross-institutional and cross-market spread of financial risks; the second is to improve the basic system of prudential supervision, strengthen the financial supervision coordination mechanism, and promote micro-prudential supervision to leave no blanks; The third is to guide behavior supervision and protect the legitimate rights and interests of financial consumers. In terms of ongoing disposal, we must consolidate the responsibilities of shareholders, various creditors, local governments and financial regulatory authorities. From the perspective of post-accountability, we must seriously investigate and punish the responsibilities of financial institutions, regulatory agencies, and local governments during the formation of major financial risks, and effectively prevent moral hazards.

Improve the international financial coordination and cooperation governance mechanism. The Chinese economy is a big country economy, with strong spillover effects and spillback effects. The RMB will gradually become an international currency in a market-oriented way. Building a modern central bank system in this context requires us to proceed from the perspective of improving the international financial coordination and cooperation governance mechanism, promote the reform of the international monetary system and financial supervision, actively participate in the construction of a global financial safety net, improve the RMB exchange rate formation mechanism, and promote finance Two-way opening.

A major move to build a modern central bank system

Improve the money supply control mechanism. Improve the central bank’s long-term mechanism for regulating the liquidity, capital and interest rate constraints created by the bank’s currency, and keep the money supply and the growth rate of social financing scale basically matching the growth rate of nominal GDP reflecting potential output. Strengthen the rules and transparency of monetary policy operations, establish an institutionalized monetary policy communication mechanism, and effectively manage and guide expectations. Promote the research and development of digital currency steadily, carry out controllable trials in an orderly manner, and improve the legal framework of legal digital currency. Improve the central bank’s policy interest rate system with open market operating interest rates as short-term policy rates and medium-term lending convenience rates as medium-term policy rates, improve the interest rate corridor mechanism, and guide market interest rates to fluctuate around the central bank’s policy interest rate. Deepen the reform of quoted interest rates in the loan market, drive deposit interest rates to gradually become market-oriented, and enable the central bank’s policy interest rate to be smoothly transmitted to loan interest rates and deposit interest rates through market interest rates. Break the hidden lower limit of loan interest rates, guide the allocation of more financial resources to small and micro enterprises and private enterprises, improve the competitiveness of the credit market for small and private enterprises, and solve the problem of financing difficulties for small and micro enterprises and private enterprises from an institutional perspective.

Build a financial system to effectively support the real economy. Do a good job in the design of cross-cycle policies at the macro level, and use modern currency management to promote high-quality economic development. Introduce incentive compatibility mechanism at the micro level, innovate structural monetary policy tools, guide financial institutions to optimize credit structure, support key areas and weak links of the national economy, open up the transmission of finance to the real economy, and accelerate the construction of a domestic A new development pattern in which the international double cycle promotes each other. Implement the new development concept, insist on innovative development, improve the financial support innovation system, build a capital chain around the innovation chain and industrial chain, and form a benign interaction between finance, technology and industry; adhere to coordinated development, improve the rural financial service system, and maintain county financial institutions as legal persons The overall position is stable, the integrity of the financial system is maintained, and the coordinated development of urban and rural areas is promoted; adhere to green development, develop green finance, promote green and low-carbon development, and promote market-based trading of carbon emission rights; adhere to open development, promote two-way financial opening, and various financial institutions Equal competition; adhere to shared development, increase financial support for small and micro enterprises and private enterprises, improve the level of financial technology, and enhance financial inclusiveness.

Establish a modern financial institution system. In accordance with the principles of marketization, rule of law, and internationalization, a modern financial institution system that is highly adaptable, competitive, and inclusive should be improved. Focus on strengthening corporate governance, deepen the reform of state-owned commercial banks, and better serve small, micro and private enterprises. Starting from the improvement of the system, support the sustained and healthy development of small and medium banks and rural credit cooperatives, and form a banking system structure with fair competition among all types of banks. Reform and optimize policy-based finance, implement separate account management for policy-based and commercial businesses, and enhance the ability to support national strategies. Improve the financing structure, vigorously develop the bond market and multi-level capital market, and increase the proportion of direct financing. Make overall plans for financial infrastructure such as comprehensive statistics, anti-money laundering, and financial market registration and custody, clearing and settlement, payment, and credit investigation, promote the interconnection of various financial infrastructures at home and abroad, and build a financial infrastructure management system that adapts to the two-way opening of finance.

Promote the two-way opening of finance. Accelerate the realization of pre-access national treatment plus negative list management in the financial sector. Under the premise that financial businesses and financial institutions are licensed to operate, uniform access standards and encourage all types of capital to enter the financial industry on an equal basis in accordance with the law. We will steadily promote the internationalization of the renminbi, adhere to market-driven and independent choices of enterprises, and create a new type of mutually beneficial cooperation based on the free use of renminbi. Maintain the flexibility of the RMB exchange rate, give full play to the function of the automatic macroeconomic stabilizer, and achieve a balance between internal and external equilibrium. Improve the ability to participate in international financial governance, actively participate in the formulation of international financial rules, strengthen cooperation with international organizations, and promote the establishment of a diversified and stable international monetary system.

Improve financial risk prevention, early warning, handling, and accountability systems. Maintain financial security and hold the bottom line of avoiding systemic risks. Improve the macro-prudential management system, strengthen the overall supervision of systemically important financial institutions, financial holding companies, and financial infrastructure, gradually incorporate major financial activities, financial markets, financial institutions, and financial infrastructure into macro-prudential management, and make use of macro-prudential stress testing. Active role in risk identification and regulatory calibration. Establish an authoritative and efficient emergency response mechanism for major financial risks, improve the deposit insurance system, and give full play to the role of the deposit insurance fund as a disposal platform on the premise that shareholders, creditors, etc., bear losses in compliance with laws and regulations, and the central bank fulfills its responsibilities as the lender of last resort in accordance with the law. Strict market discipline, accountability for the formation of major financial risks, and financial institutions, local governments, and financial regulatory authorities shall bear responsibilities in accordance with the law.

The original title is “Building a Modern Central Bank System”