2013 ANNUAL REPORT regulations, so as to maintain market order for fair competition and to promote the healthy development of the financial markets. On September 24, 2013, the inaugural and first regular meeting of the self-regulatory pricing mechanism was convened Beijing. On January 22, 2014, the self-regulatory pricing mechanism deliberated and approved the Implementation Measures for Qualification Prudential Assessment on Financial Institutions. By conducting self-regulatory assessment on financial institu tions on a voluntary base, the mechanism is going to select some to become basic members of the mechanism and authorize them to issue interbank certificates of de posit and grant them rights to participate in market pricing and product innovation giving them incentives to improve the legal person governance, strengthen financial discipline, and enhance self-pricing abilities. The establishment and improvement of self-regulatory pricing mechanism is conducive to the sound development of finan cial markets, prevention of financial risks, laying a solid foundation for advancing the reform of market-based interest rate Third, the centralized quote and release mechanism of loan prime rate (LPR) was formally established. The LPR is the most preferential lending rate offered by a commercial bank to its prime clients. Other lending rates are generated by adding or subtracting basis points based on the LPR. On October 25, 2013, on the basis of the self-regulatory pricing mechanism, centralized quote and release mechanism of LPR was formally put into operation. The weighted average of the quotes of the LPR was released at the same time. Since its debut, the operation of LPr has been running stably and its scope of application has been continuously expanded. According to sta tistics, by the end of 2013, a total of more than 30 billion yuan of loans were issued at rates based on the LPR, and the interest-rate swaps linked to the LPr was developing on a gradual basis. The LPR mechanism represents an expansion of the market-based interest rate quotation from the money market to the credit market. It complements Shibor in product term structure and varieties. and provides an important reference to financial institutions for the pricing of their credit products. It is of great significance for improving benchmark interest rate system of the financial market, optimizing mar- ket-based interest rate formation mechanism, unclogging the interest rate transmission hannels and maintaining fair and orderly competition in the credit market Fourth, the issuance of interbank certificates of deposit was advanced steadily. Be-
2013 ANNUAL REPORT 30 regulations, so as to maintain market order for fair competition and to promote the healthy development of the financial markets. On September 24, 2013, the inaugural and first regular meeting of the self-regulatory pricing mechanism was convened in Beijing. On January 22, 2014, the self-regulatory pricing mechanism deliberated and approved the Implementation Measures for Qualification Prudential Assessment on Financial Institutions. By conducting self-regulatory assessment on financial institutions on a voluntary base, the mechanism is going to select some to become basic members of the mechanism and authorize them to issue interbank certificates of deposit and grant them rights to participate in market pricing and product innovation, giving them incentives to improve the legal person governance, strengthen financial discipline, and enhance self-pricing abilities. The establishment and improvement of self-regulatory pricing mechanism is conducive to the sound development of financial markets, prevention of financial risks, laying a solid foundation for advancing the reform of market-based interest rate. Third, the centralized quote and release mechanism of loan prime rate (LPR) was formally established. The LPR is the most preferential lending rate offered by a commercial bank to its prime clients. Other lending rates are generated by adding or subtracting basis points based on the LPR. On October 25, 2013, on the basis of the self-regulatory pricing mechanism, centralized quote and release mechanism of LPR was formally put into operation. The weighted average of the quotes of the LPR was released at the same time. Since its debut, the operation of LPR has been running stably and its scope of application has been continuously expanded. According to statistics, by the end of 2013, a total of more than 30 billion yuan of loans were issued at rates based on the LPR, and the interest-rate swaps linked to the LPR was developing on a gradual basis. The LPR mechanism represents an expansion of the market-based interest rate quotation from the money market to the credit market. It complements Shibor in product term structure and varieties, and provides an important reference to financial institutions for the pricing of their credit products. It is of great significance for improving benchmark interest rate system of the financial market, optimizing market-based interest rate formation mechanism, unclogging the interest rate transmission channels and maintaining fair and orderly competition in the credit market. Fourth, the issuance of interbank certificates of deposit was advanced steadily. Be-
ing a money market instrument, an interbank certificate of deposit refers to a book entry certificate of a term deposit issued by a deposit-taking financial institution with a legal person status on the interbank market. On December 8, 2013, the PBC issued the Provisional Rules on the Management of Interbank Certificate of Deposit, which went into effect on December 9 2013. On December 12-13. 2013 ten financial institu- tions, including China Development Bank and the Industrial and Commercial Bank of China, issued the first batch of interbank certificates of deposit and thereafter consec- utively carried out their transactions on the secondary market. Overall, the issuance of the first batch of interbank certificates of deposit went well, attracted many investors and received positive response from all walks of the society. Interbank certificates of deposit are based on Shibor and issued at the market price. They can provide a more transparent and market-based reference for the pricing of medium-and long-term Shi bor, and help to enhance the benchmark status of the medium-and long-term Shibor Meanwhile, they enrich the products in the financial market, help broaden the financ- ing channels for financial institutions, and promote the development of interbank business. The issuance of interbank certificates of deposit can also provide experience for issuing large certificates of deposit to enterprises and individuals, which will be conducive to exploring the effective ways to promote the market-based deposit rate reform in a stable and orderly manner In recent years, the market-based interest rate reform has been continuously ad vanced, and the interest rates of money market, bond market, loans and deposits in foreign currencies, and RMB loans have become consecutively market-based. The in- terest rate formation mechanism decided by market supply and demand has also been improved. The PBC maintains caps only on RMB deposit interest rates. According to the decisions of the Third Plenary Session of the 18 CPC Central Committee, for the next stage, the PBC will continue to follow the general objective of building and im- proving market-based interest rate formation mechanism. Under the precondition of controllable risks and taking into consideration of the development of financial insti- tutions' self-pricing ability, the construction of the financial markets and the progress in supporting reforms such as deposit insurance system and exit mechanism of finan- cial institutions, the PBC will advance the market-based interest rate reform progres ely, so as to enable the market to play a decisive role in resource allocation 31■
31 ing a money market instrument, an interbank certificate of deposit refers to a bookentry certificate of a term deposit issued by a deposit-taking financial institution with a legal person status on the interbank market. On December 8, 2013, the PBC issued the Provisional Rules on the Management of Interbank Certificate of Deposit, which went into effect on December 9, 2013. On December 12-13, 2013 ten financial institutions, including China Development Bank and the Industrial and Commercial Bank of China, issued the first batch of interbank certificates of deposit and thereafter consecutively carried out their transactions on the secondary market. Overall, the issuance of the first batch of interbank certificates of deposit went well, attracted many investors, and received positive response from all walks of the society. Interbank certificates of deposit are based on Shibor and issued at the market price. They can provide a more transparent and market-based reference for the pricing of medium- and long-term Shibor, and help to enhance the benchmark status of the medium- and long-term Shibor. Meanwhile, they enrich the products in the financial market, help broaden the financing channels for financial institutions, and promote the development of interbank business. The issuance of interbank certificates of deposit can also provide experience for issuing large certificates of deposit to enterprises and individuals, which will be conducive to exploring the effective ways to promote the market-based deposit rate reform in a stable and orderly manner. In recent years, the market-based interest rate reform has been continuously advanced, and the interest rates of money market, bond market, loans and deposits in foreign currencies, and RMB loans have become consecutively market-based. The interest rate formation mechanism decided by market supply and demand has also been improved. The PBC maintains caps only on RMB deposit interest rates. According to the decisions of the Third Plenary Session of the 18th CPC Central Committee, for the next stage, the PBC will continue to follow the general objective of building and improving market-based interest rate formation mechanism. Under the precondition of controllable risks and taking into consideration of the development of financial institutions’ self-pricing ability, the construction of the financial markets and the progress in supporting reforms such as deposit insurance system and exit mechanism of financial institutions, the PBC will advance the market-based interest rate reform progressively, so as to enable the market to play a decisive role in resource allocation
2013 ANNUAL REPORT CREDIT POLICY In 2013, the PbC earnestly implemented the decisions of the CPC Central Com mittee and the State Council, and fulfilled its mandates as the central bank, followed the essential requirement of finance serving the real economy, focused on allowing the credit policy guidance and instruments to play a positive role in transforming econom- ic growth pattern as well as in economic restructuring, and improved the assessment of effectiveness of credit policy guidance. It appropriately deployed financial resources, adhered to market demand orientation, and comprehensively improved the role and capacity of financial sector in bolstering and serving the real economy so as to promote sound and sustainable economic growth Enhancing coordination and cooperation financial institutions to fully implement pol between credit policy and industrial policy, icy requirements regarding providing finan- and focusing on optimizing credit struc- cial services to develop such industries as ture to promote economic restructuring as the tertiary industry and service outsourcing, well as transformation and upgrading and to explore credit products and means of service tailored to each industrys own de- The PbC earnestly carried out the re velopment features in an attempt to create quirements of national industrial policy and favorable financial environment for the de macroeconomic management, actively ad- velopment of modern service industry. The dressed issues related to supporting the real PBC urged and guided financial institutions economy with financial services. The pbc to speed up the innovation of financial prod. guided financial institutions to focus on op- ucts and services, and to provide financial timizing credit structure to make funding support and services for aging population more targeted and effective, to continuously related service industry and city infrastruc- beef up financial support for key areas and ture development, and to push forward sup- weak links, and to better served economic porting financial services for optimizing the transformation and upgrading to promote the structure of and rejuvenating key industries growth of real economy. It urged and guided such as railroads construction, ship-building
2013 ANNUAL REPORT 32 Credit Policy In 2013, the PBC earnestly implemented the decisions of the CPC Central Committee and the State Council, and fulfilled its mandates as the central bank, followed the essential requirement of finance serving the real economy, focused on allowing the credit policy guidance and instruments to play a positive role in transforming economic growth pattern as well as in economic restructuring, and improved the assessment of effectiveness of credit policy guidance. It appropriately deployed financial resources, adhered to market demand orientation, and comprehensively improved the role and capacity of financial sector in bolstering and serving the real economy so as to promote sound and sustainable economic growth. financial institutions to fully implement policy requirements regarding providing financial services to develop such industries as the tertiary industry and service outsourcing, and to explore credit products and means of service tailored to each industry’s own development features in an attempt to create a favorable financial environment for the development of modern service industry. The PBC urged and guided financial institutions to speed up the innovation of financial products and services, and to provide financial support and services for aging populationrelated service industry and city infrastructure development, and to push forward supporting financial services for optimizing the structure of and rejuvenating key industries, such as railroads construction, ship-building, Enhancing coordination and cooperation between credit policy and industrial policy, and focusing on optimizing credit structure to promote economic restructuring as well as transformation and upgrading The PBC earnestly carried out the requirements of national industrial policy and macroeconomic management, actively addressed issues related to supporting the real economy with financial services. The PBC guided financial institutions to focus on optimizing credit structure to make funding more targeted and effective, to continuously beef up financial support for key areas and weak links, and to better served economic transformation and upgrading to promote the growth of real economy. It urged and guided
coal-fired power, and iron and steel produc- was strengthened, the Guiding Opinions on tion under the precondition of preventing Enhancing Financial Innovation to Support credit risk. Efforts were made to vigorously Faster Development of Modern Agriculture promote green credit by guiding financial was released, which clearly stated that in- institutions to improve internal credit policy novation of mindset. methods and mech or energy-saving and environmental pro- nisms should be initiated to achieve new tection and step up financial support for the breakthroughs in rural financial product and energy-saving and environmental protec- service innovation, and financial institutions tion industries. Innovation of institutions were guided under multI-pronged approach and mechanisms was promoted forcefully to further improve financial services for to better combine science and technology modern agricultural development Innovation with finance and bolster the development of on the interbank bond market was enhanced national innovation system Communication to broaden financing channels for leading and cooperation with other ministries, such enterprises in agriculture industrialization as the Ministry of Culture, was enhanced to Rural financial infrastructure developmen carefully study and boost policy measures for culture-finance cooperation and to im was stepped up through improving non-cash payment and settlement and vigorously ad prove financial services for developing cul tural industries by promoting inn vancing development of credit information culture-finance institutions and mechanisms system in rural areas to enhance the capacit as well as financial products and services and quality of basic rural financial services tailored to the needs and characteristics of As of the year-end, outstanding agro-linked cultural industries loans of financial institutions across china jumped 18.4 percent year on year to 20.88 Promoting innovation of financial prod- trillion yuan, 4.5 percentage points higher ucts and services in rural pport than the growth of all the loans of financial modern agricultural development institutions during the corresponding perio The PBC flexibly used a mix of monetary Outstanding national agro-linked central policy instruments, including central bank bank lending posted 168.4 billion yuan,an agro-Iinked loans, rediscounting and reserve increase of 10.9 billion yuan compared with requirement ratio, expanded the lending the start of the year; the cumulative increase scope, and encouraged and guided financial in rediscount quota stood at 16.5 billion yuan institutions to continuously increase credit nationwide, which mainly targeted at regions supply to the agricultural sector, rural areas where bills issued by agro linked small-and and farmers. Macro-credit policy guidance micro-businesses accounted for a large share 33■
33 coal-fired power, and iron and steel production under the precondition of preventing credit risk. Efforts were made to vigorously promote green credit by guiding financial institutions to improve internal credit policy for energy-saving and environmental protection and step up financial support for the energy-saving and environmental protection industries. Innovation of institutions and mechanisms was promoted forcefully to better combine science and technology with finance and bolster the development of national innovation system. Communication and cooperation with other ministries, such as the Ministry of Culture, was enhanced to carefully study and boost policy measures for culture-finance cooperation and to improve financial services for developing cultural industries by promoting innovation of culture-finance institutions and mechanisms as well as financial products and services tailored to the needs and characteristics of cultural industries. Promoting innovation of financial products and services in rural areas to support modern agricultural development The PBC flexibly used a mix of monetary policy instruments, including central bank agro-linked loans, rediscounting and reserve requirement ratio, expanded the lending scope, and encouraged and guided financial institutions to continuously increase credit supply to the agricultural sector, rural areas and farmers. Macro-credit policy guidance was strengthened, the Guiding Opinions on Enhancing Financial Innovation to Support Faster Development of Modern Agriculture was released, which clearly stated that innovation of mindset, methods and mechanisms should be initiated to achieve new breakthroughs in rural financial product and service innovation, and financial institutions were guided under multi-pronged approach to further improve financial services for modern agricultural development. Innovation on the interbank bond market was enhanced to broaden financing channels for leading enterprises in agriculture industrialization. Rural financial infrastructure development was stepped up through improving non-cash payment and settlement and vigorously advancing development of credit information system in rural areas to enhance the capacity and quality of basic rural financial services. As of the year-end, outstanding agro-linked loans of financial institutions across China jumped 18.4 percent year on year to 20.88 trillion yuan, 4.5 percentage points higher than the growth of all the loans of financial institutions during the corresponding period. Outstanding national agro-linked central bank lending posted 168.4 billion yuan, an increase of 10.9 billion yuan compared with the start of the year; the cumulative increase in rediscount quota stood at 16.5 billion yuan nationwide, which mainly targeted at regions where bills issued by agro-linked small- and micro-businesses accounted for a large share
2013 ANNUAL REPORT Actively adopting various measures to im- bonds used specifically for loans to small- prove the level of financial services for mi- and micro-businesses in the interbank bond cro-,small-and medium-sized enterprises market to the tune of 306.5 billion yuan The PBC earnestly carried out the Imple- Further enhancing financial support and mentation Opinions of the General Office services for people's livelihood, including of the State Council on Providing Financial poverty relief, post-disaster recovery and Support for the Development of Small-and reconstruction, employment, education, Micro-Businesses, adopted a mix of mone- ethnic groups, and migrant workers tary policy tools, including differentiated re- serve requirement ratio, central bank lending The PBC explored the establishment of and rediscount, to encourage and support fi co-movement and coordination mechanism nancial institutions to increase credit supply for offering financial services in contiguous o small- and micro-businesses. Efforts were poverty-stricken areas, steadily pushed for made to strengthen macro-credit guidance ward financial services for poverty relief and promote innovation of credit products and economic development, and boosted the fire- services, improve the assessment of effec- power of agro-linked financial institutions by tiveness of credit policy guidance for small- employing a mix of monetary policy instru and medium-sized enterprises(SMEs), and ments, including central bank lending, redis- guide financial institutions to implemen count and differentiated reserve requirement published policy measures. Special oversight ratio. to channel more credit resources to the and inspection that targeted at financial ser- poverty-stricken areas. On-site investigation vices for small- and micro-businesses were and inspection were conducted in contigu- conducted SMEs were encouraged to raise ous poverty-stricken areas, such as Zhashui funds by issuing non-financial enterprise and Xunyang counties in Shaan'xi Province debt financing instruments, while support Dawu and Jianshi counties in Hubei Province was given to eligible financial institutions to and Yingjisha county in Xinjiang Uygur Au- issue financial bonds specifically for loans to tonomous Region. The Notice on Establishing small-and micro-businesses. As of the year- Co-movement and Coordination Mechanisms end, outstanding RMB loans of financial for Offering Financial Services in Contigu institutions to small-and micro-businesses ous Poverty-stricken Areas to Alleviate Pov- stood at 13.21 trillion yuan, up 14.2 percent erty and Promote Development was released year on year, or 0. 1 percentage points higher based on research and investigation. Efforts than the average growth of all loans during were made to strengthen coordination and co- he corresponding period nationwide. A to- movement as well as information exchange tal of 35 commercial banks issued financial and sharing among the Pbc branch offices 34
2013 ANNUAL REPORT 34 Actively adopting various measures to improve the level of financial services for micro-, small- and medium-sized enterprises The PBC earnestly carried out the Implementation Opinions of the General Office of the State Council on Providing Financial Support for the Development of Small- and Micro-Businesses, adopted a mix of monetary policy tools, including differentiated reserve requirement ratio, central bank lending and rediscount, to encourage and support financial institutions to increase credit supply to small- and micro-businesses. Efforts were made to strengthen macro-credit guidance, promote innovation of credit products and services, improve the assessment of effectiveness of credit policy guidance for smalland medium-sized enterprises (SMEs), and guide financial institutions to implement published policy measures. Special oversight and inspection that targeted at financial services for small- and micro-businesses were conducted. SMEs were encouraged to raise funds by issuing non-financial enterprise debt financing instruments, while support was given to eligible financial institutions to issue financial bonds specifically for loans to small- and micro-businesses. As of the yearend, outstanding RMB loans of financial institutions to small- and micro-businesses stood at 13.21 trillion yuan, up 14.2 percent year on year, or 0.1 percentage points higher than the average growth of all loans during the corresponding period nationwide. A total of 35 commercial banks issued financial bonds used specifically for loans to smalland micro-businesses in the interbank bond market to the tune of 306.5 billion yuan. Further enhancing financial support and services for people’s livelihood, including poverty relief, post-disaster recovery and reconstruction, employment, education, ethnic groups, and migrant workers The PBC explored the establishment of co-movement and coordination mechanisms for offering financial services in contiguous poverty-stricken areas, steadily pushed forward financial services for poverty relief and economic development, and boosted the firepower of agro-linked financial institutions by employing a mix of monetary policy instruments, including central bank lending, rediscount and differentiated reserve requirement ratio, to channel more credit resources to the poverty-stricken areas. On-site investigation and inspection were conducted in contiguous poverty-stricken areas, such as Zhashui and Xunyang counties in Shaan’xi Province, Dawu and Jianshi counties in Hubei Province and Yingjisha county in Xinjiang Uygur Autonomous Region. The Notice on Establishing Co-movement and Coordination Mechanisms for Offering Financial Services in Contiguous Poverty-stricken Areas to Alleviate Poverty and Promote Development was released based on research and investigation. Efforts were made to strengthen coordination and comovement as well as information exchange and sharing among the PBC branch offices