[Cover Story] Exclusive Interview with Yi Gang: Moving Towards High-Quality Development

The exclusive interview with Yi Gang, Governor of the People’s Bank of China, was conducted by Caixin reporters Zhang Jiwei, Peng Qinqin, and Li Zengxin in Bali, Indonesia, to discuss significant changes in the global and Chinese economies over the last six months. The interview took place amidst the backdrop of the 2018 IMF/World Bank Fall Annual Meeting, characterized by its pervasive sense of pressure and pessimism among central bank governors [para. 1].

The IMF’s World Economic Outlook, released in October, revised global economic growth forecasts downward for the first time in two years, reflecting concerns over escalating U.S.-China trade frictions and multiple interest rate hikes by the Federal Reserve this year. This has resulted in reduced capital inflows to emerging markets, financial tightening, and weakened economic growth momentum [para. 2][para. 3]. Simultaneously, China has implemented three targeted reserve requirement ratio (RRR) cuts since April, releasing billions of yuan into the economy to mitigate the effects of these pressures [para. 3].

Yi Gang laid out an optimistic but realistic assessment of China’s macroeconomy. He highlighted that despite significant downward pressures, China’s macroeconomic leverage ratio, financial risk management, and economic structure have shown signs of stability and improvement. He assured that China’s economic growth targets for the year would be met, and economic restructuring towards high-quality development is progressing smoothly [para. 5].

Addressing concerns over consumption, Yi Gang explained that domestic consumption significantly contributes to China’s GDP growth, with a noticeable rise in service industry share as the economy transitions. He stressed the importance of maintaining this consumption growth as a driver of high-quality development [para. 6][para. 7].

The interview also touched upon the latest RRR cut introduced by the People’s Bank of China, which released approximately 1.2 trillion yuan into the financial system. Yi Gang justified this policy by emphasizing the need for adequately ample liquidity to support economic transitions and ensure that the monetary policy remains prudent and neutral [para. 8].

Yi Gang elaborated on China’s rate decisions, especially concerning the Federal Reserve’s interest rate hikes. Contrary to mimicking these hikes, China has maintained stable interest rates, balancing between external pressures and domestic priorities to keep economic conditions favorable for growth [para. 9][para. 10]. He noted that the transmission mechanism of monetary policy has started to show effectiveness, with lending rates to small and micro-enterprises improving [para. 11].

The challenges faced by private enterprises due to stringent financial regulations and tax policies have not gone unnoticed. Yi Gang assured that the central bank would use market-oriented approaches to support these enterprises, highlighting its commitment to policy measures that encourage sustainable investment and financing [para. 12].

Yi Gang also addressed questions about the issuance of central bank bills in Hong Kong, reflecting China’s support for developing offshore RMB markets while keeping a focus on domestic market conditions [para. 13][para. 14]. Highlighting financial opening initiatives, he mentioned that significant steps have been taken this year to open up China’s financial markets, with several measures already implemented or planned by year-end. These measures cover various essential aspects such as banks, securities, and insurance [para. 15][para. 16][para. 17][para. 18]. Yi Gang asserted that China remains committed to globalization and free trade principles despite rising protectionism [para. 19].

In summary, Yi Gang’s interview provided reassurance on China’s economic resilience and stability amid global economic challenges. He expressed confidence in China’s ability to achieve high-quality development through prudent monetary policies, comprehensive financial reforms, and ongoing structural optimization [para. 1][para. 2][para. 5][para. 6][para. 7][para. 8][para. 13][para. 17][para. 18]. The overall message was one of cautious optimism tempered with realistic acknowledgment of global economic uncertainties [para. 1][para. 2][para. 8][para. 10][para. 11][para. 12][para. 18][para. 19].

AI generated, for reference only