Yi Gang: monetary policy will continue to work from the aggregate to support economic recovery

Yi Gang, governor of the central bank, said in an exclusive interview with a reporter from China International Television (cgtn) that China's monetary policy has always been compatible with supporting the development of the real economy. The growth rate of M2 and social financing in broad sense basically matches the growth rate of nominal GDP, maintains reasonable and sufficient liquidity, and supports the development of small and medium-sized enterprises to achieve the goal of maximizing employment. Over the past decade, China's market interest rates have been steadily falling. The level of natural interest rate is mainly determined by the marginal output rate of capital and the long-term development trend of population. China's interest rate formation mechanism is determined by market supply and demand. The central bank guides market interest rates by using monetary policy tools. At present, the interest rate of time deposits is about 1-2%, the interest rate of bank loans is about 4-5%, and the bond and stock markets operate more effectively. Considering the inflation level, we can see that the real interest rate is quite low, and the financial market can effectively allocate resources. China implements a flexible exchange rate system based on market supply and demand and adjusted with reference to a basket of currencies. Compared with 20 years ago, the RMB appreciated about 25% against the US dollar, about 30% against the nominal exchange rate of a basket of currencies, and the real exchange rate appreciated more. China's inflation outlook is relatively stable, with CPI increasing by 2.1% year-on-year and PPI increasing by 6.4% year-on-year. Maintaining price stability and maximizing employment are our priorities. Since the beginning of this year, affected by the epidemic and external shocks, China's economy has faced certain downward pressure. Monetary policy will continue to support economic recovery from the aggregate. At the same time, we will also emphasize the use of structural monetary policy tools such as supporting small and medium-sized enterprises and green transformation.