News Center



Home News Center News

The Fed’s Moves and China’s Financial Reforms

Mar 03-2022   



For China and the rest of the world, the most daunting challenge in 2022 concerns whether a steady transition to normal economic growth can be achieved, says Prof. Huang Yiping of the NSD in an interview. In addition, China needs to work for transitions to the new economic development pattern and phase as well as ‘dual circulation’.

 

Prof. Huang, also Associate Dean of the NSD and Director of Institute of Digital Finance at PKU, answers questions on the Fed’s policy adjustment, China’s efforts in preventing systemic financial risks, and the government’s role in supporting the innovation of SMEs, among others. The interview is part of a co-production between the NSD and Tencent News in which NSD professors elucidate issues related to the global and Chinese economies.

 

The Fed can be expected to wind down liquidity pumping soon; as a result, many countries might be confronted with capital outflows and currency depreciation, says Prof. Huang. Though not fully exempted from such pressures, China still has maneuvering space, including a strong and large economy, limited opening of capital account, and a vast foreign reserve, to safeguard financial stability.

 

Even so, China needs to remain vigilant about financial risks. Prof. Huang is particularly concerned about two areas: loans to the SMEs and debts of local governments. Amid the pandemic, banks have followed government guidance to hand out more loans to SMES, hence Prof. Huang’s worry about a possible rise in the bad-loan ratio and the concomitant disruptions to small and medium-sized banks. Equally worrying is the conspicuous increase in the debts piled on by local governments, SOEs, and financing platforms.

 

As China makes the transition to normal economic growth, its domestic consumption might be foot-dragging, which, coupled with a possible decline in export, could further push down prices and even render more productive capacity redundant, cautions Prof. Huang.

 

What also draws his attention is the internationalization of the Chinese currency, which was first initiated in 2009 chiefly to support cross-border trade and investment settlement. A new round of RMB internationalization will focus more on its role as an investment item and store of value based on market demand. That inevitably involves the opening of the financial market and a balancing act to ensure financial stability, says Prof. Huang.

The Fed’s Moves and China’s Financial Reforms

Mar 03-2022   



For China and the rest of the world, the most daunting challenge in 2022 concerns whether a steady transition to normal economic growth can be achieved, says Prof. Huang Yiping of the NSD in an interview. In addition, China needs to work for transitions to the new economic development pattern and phase as well as ‘dual circulation’.

 

Prof. Huang, also Associate Dean of the NSD and Director of Institute of Digital Finance at PKU, answers questions on the Fed’s policy adjustment, China’s efforts in preventing systemic financial risks, and the government’s role in supporting the innovation of SMEs, among others. The interview is part of a co-production between the NSD and Tencent News in which NSD professors elucidate issues related to the global and Chinese economies.

 

The Fed can be expected to wind down liquidity pumping soon; as a result, many countries might be confronted with capital outflows and currency depreciation, says Prof. Huang. Though not fully exempted from such pressures, China still has maneuvering space, including a strong and large economy, limited opening of capital account, and a vast foreign reserve, to safeguard financial stability.

 

Even so, China needs to remain vigilant about financial risks. Prof. Huang is particularly concerned about two areas: loans to the SMEs and debts of local governments. Amid the pandemic, banks have followed government guidance to hand out more loans to SMES, hence Prof. Huang’s worry about a possible rise in the bad-loan ratio and the concomitant disruptions to small and medium-sized banks. Equally worrying is the conspicuous increase in the debts piled on by local governments, SOEs, and financing platforms.

 

As China makes the transition to normal economic growth, its domestic consumption might be foot-dragging, which, coupled with a possible decline in export, could further push down prices and even render more productive capacity redundant, cautions Prof. Huang.

 

What also draws his attention is the internationalization of the Chinese currency, which was first initiated in 2009 chiefly to support cross-border trade and investment settlement. A new round of RMB internationalization will focus more on its role as an investment item and store of value based on market demand. That inevitably involves the opening of the financial market and a balancing act to ensure financial stability, says Prof. Huang.