Li vows to boost support for real economy

Updated: 2016-06-22 02:24

By Hu Yongqi(China Daily)

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Real economy to be supported with reasonably sufficient liquidity, stable exchange rates

China will strengthen the financial sector's role in supporting the real economy by providing reasonably sufficient liquidity and achieving stable exchange rates for the renminbi, according to Premier Li Keqiang.

Li made the vow on Monday during a visit to the headquarters of the People's Bank of China — the central bank — and to China Construction Bank in Beijing.

Amid a volatile international financial market, China's financial reforms have been progressing smoothly to mitigate risks and keep renminbi exchange rates stable, effectively supporting domestic economic growth, Li said.

However, some regions and industries in the real economy are facing growth difficulties, "and prudent monetary policies must better coordinate with proactive fiscal policies for flexibility and accuracy in financing," Li said.

Zhou Xiaochuan, governor of the central bank, said prudent monetary policies have provided reasonably sufficient liquidity to prop up the real economy.

Guo Tianyong, head of the China Banking Research Center at Central University of Finance and Economics, said, "The destination for loans is consistent with China's macroeconomic and industrial policies. But banks should further enhance accuracy in lending to targeted business sectors to better serve the real economy."

Li said the financial sector must also support the new economy, which features in integration with the internet, innovative enterprises and smart manufacturing. He called on financial institutions to back small and medium-sized enterprises and private businesses at lower cost.

"Commercial banks should support the development of the real economy by financing major infrastructure projects, SMEs and innovation-driven companies," he told China Construction Bank employees.

As of Monday, the bank had 2.8 trillion yuan ($427 billion) in loans for infrastructure projects, including new loans of 110 billion yuan in this field for the first quarter, a year-on-year increase of 86 percent.

Li called on banks to continuously finance companies purchasing agricultural produce and to back agricultural manufacturing as a way to increase farmers' income.

The international market has questioned if China intentionally manipulated the renminbi's depreciation after the exchange rate to the US dollar fell by 2 percent following a reform on Aug 11 last year.

Li said the exchange rates for the renminbi should be kept at a reasonably stable level instead of fluctuating unilaterally.

Wu Qing, deputy director of banking research at the State Council's Development Research Center, said Chinese banks have limited measures to support the real economy, as they are under pressure from the regulatory authority and other government departments.

"Traditional means such as collateral loans cannot satisfy the financial demands of SMEs, which are pinning their hopes on financial innovation," Wu said.

"But most financial institutions lack the ability to innovate, partly due to regulatory restrictions and a widespread copycat culture. There is a gap between the desire and the reality to serve the real economy."

But Wu said there is still hope for better-regulated internet finance companies after an industrywide cleanup.

Jiang Xueqing contributed to this story.