www.pbc.gov.cn | Updated: October 19   From October 17 to 18, 2019, Yi Gang, governor of the People's Bank of China, and Chen Yulu, deputy governor of the People's Bank of China, attended the G20 Finance Ministers and Central Bank Governors Meeting held in Washington DC. The meeting dealt mainly with the global economic situation, infrastructure investment, international financial architecture, financial industry reform, stablecoins, international taxation and other issues. GLGA Research Institute collates the results of the dialogue among central bank governors and pays close attention to the development trend of global financial and monetary policies. 

The meeting pointed out that since April this year, as the global growth has continued to slow down, the global economy is expected to grow by 3% this year and to pick up next year though the outlook still remains high uncertain.  Under the context of limited policy space, high debt and high financial vulnerability, the global economy is facing downside risks, mainly including trade friction, policy uncertainty and geopolitical risks. 

Governor Yi Gang introduced China's economic situation and said that in recent years, as the multilateral trading system has encountered severe challenges, China is willing to cooperate with all to safeguard the rule-based multilateral trade system together. China will continue to further open up its financial industry, including lifting the share ratio limit of foreign financial institutions and providing an equal competitive environment for Chinese and foreign financial institutions. China will work with all parties to boost relevant reforms so that the IMF quotas can objectively reflect the reality of the international economic structure. China attaches great importance to cooperation with low-income countries, has achieved noticeable accomplishments in promoting economic and social development of low-income countries and has established a joint capacity-building center with the IMF in an effort to provide a large number of training for low-income countries. 

In his speech, Yi Gang said that despite the downward pressure, China's economy operates stably and its economic structure continues to be optimized. The PBC has implemented a prudent monetary policy, further deepened the market-oriented reform of interest rate, steadily increased monetary credit and kept the market interest rate low. The RMB exchange rate remains basically stable. Risk of some small and medium-sized banks have been decisively disposed of and resolved in a timely way. The PBC will continue to implement a prudent monetary policy and create a suitable monetary and financial environment for high-quality economic development. 

At the same time, Yi Gang urged the International Monetary Fund (IMF) to continue to promote quotas and governance reform and increase the voice and representation of emerging market economies and developing countries. In a written statement submitted to the meeting, Yi Gang stated that "We are badly disappointed at that the 15th General Review of Quotas failed to reach an agreement on increasing quotas and adjusting quota proportion. The IMF should continue to push forward the quota and governance reform a prerequisite for the IMF to fulfill its duties." 

Yi Gang stressed that quota is the main source of funds for the IMF, and the failure to adjust the quota proportion weakens the representativeness, governance ability and legitimacy of the IMF. China supports a robust, quota-based and well-resourced IMF and safeguards its central role in the global financial safety net. "We look forward to the IMF's commitment to a clear timetable and roadmap for future quota adjustment." 

When it comes to the RMB exchange rate, Yi Gang said that the RMB exchange rate is based on market supply and demand, basically remains stable at a reasonable and balanced level with reference to the exchange rate changes of a basket of currencies, and also fluctuates in two directions according to the market changes. So far, the overall stable market response and balanced cross-border capital flows show an increasing market's acceptance to the two-way exchange rate fluctuations. From the perspective of economic fundamentals and market supply and demand, the current RMB exchange rate is at an appropriate level. 

Yi Gang pointed out that in the face of the trade tensions, it becomes a more pressing task to follow a multilateral approach to cope with the persistent excessive imbalances. China appreciates the IMF's analysis of global imbalance based on a multilateral rather than a bilateral approach. Global imbalance is a product of macroeconomic and structural policies of countries, as well as cyclical factors. Raising bilateral trade barriers is not the proper way. 

During the annual meeting of the IMF, the Group of Seven (G7) held a meeting of finance ministers on the 17th to discuss the issue of digital currency. G7 believes that unless digital currency solves the profound international risks brought by it, it is not permitted to issue "stablecoins", presenting new obstacles to Facebook's plan to roll out Libra cryptocurrency. 

In the report, the G7 pointed out that the large-scale issuance of stablecoins (usually digital currencies supported by traditional currencies and other assets) is likely to threaten the global monetary system and financial stability. Like other cryptocurrencies, emerging technologies, which are now almost unregulated, may also hinder cross-border efforts to crack down on money laundering and terrorist financing, and incur cybersecurity, taxation and privacy problems. Private enterprises need to cope with challenges and risks such as laws, rules and regulations, and no digital currency should be issued before they are properly disposed of. It points out that until legal, regulatory and regulation challenges and risks are addressed, no "stablecoins" programs should be put into operation around the globe. 

It is generally believed that the global economy continues to expand by at a slower speed. Loose monetary policy and the improvement of the economic situation in some emerging market economies are helpful to improve the global economy. However, trade frictions, geopolitics and other factors may still exert a potential impact on the global economy to make it develop downward. All parties agreed to strengthen dialogue and employ a variety of policy instruments such as monetary policy, fiscal policy and structural reform to propel strong, sustainable, balanced and inclusive economic growth. 

It was widely supported to implement the G20 High-quality Infrastructure Investment Principles reached at the Osaka summit. In accordance with the G20 Roadmap on Promoting Infrastructure to Become an Independent Asset Class, how to attract funds from the private sector to invest in infrastructure construction by improving capital market supervision and how to make good use of technological advantages to promote infrastructure investment were discussed. 

It was unanimously agreed at the meeting to issue the G20 statement on stablecoins to affirm the potential benefits of financial innovation. Besides, it pointed out that stablecoins holds a range of policy and regulatory risks, especially in the fields of anti-money laundering, anti-terrorism financing, consumer protection, market integrity, etc. and that it is necessary to assess and solve these risks before the launch of stablecoins. The meeting called on international institutions including the Financial Stability Board, IMF and the Financial Action Task Force on Money Laundering to continue to study the risks and impacts of stablecoins. 

In order to facilitate the resolution of the debt of low-income countries, all parties agreed to expedite the debtor and the creditor, the public sector and the private sector to continue to jointly improve the debt sustainability and transparency. Besides, the IMF and the World Bank are required to further deepen the analysis of the debt issue. 

The parties acclaimed the financial market segmentation analysis of the Financial Stability Board and agreed to have the Board to continue to assess the effectiveness and impact of the financial industry reform. All parties supported to discuss the regulation of financial risks brought by digitalization next year. 

Source | www.xinhuanet.com, www.chinanews.com, www.ce.cn