2020 was a year full of challenges and finding new means of fiscal innovations. The global economies suffered due to the COVID-19 pandemic. However, China ended up the first G20-country to be recovering. This recovery has to do with Beijing’s policy responses and epidemic control strategy, which is quite remarkable since China was the pandemic’s epicenter. Economics expect that China’s economy will be as strong as it was pre-pandemic.
From 16 to 18 December 2020, the Central Economic Work Conference was held in Beijing, with the CPC Central Committee and the Central Military Commission members. President Xi Jinping summarized the economic work in 2020, analyzing the current economy. In his speech, he explained the specific arrangements and planning of the economic work in 2021. On 6 January 2021, the People’s Bank of China (PBOC) published an online financial outlook statement. The PBOC adheres to the general principle of pursuing progress while ensuring stability. Furthermore, the bank offers adequate financial support in new developments. Some of the key takeaways are:
Financial support mechanisms
Support for technology innovation, private companies, and enterprises from medium- to micro-sized is on its way. This support includes an extension of PBOC inclusive loan repayment policies and loan support programs, with guidance from financial institutions.
Innovation of technology
Meanwhile, the Chinese government wishes to strengthen national strategic scientific and technological capabilities. This is exciting news for scientific research institutions and universities since they will be involved in this new nationwide system.
Implementation of a prudent monetary policy
PBOC calls the policy flexible, precise, reasonable, and moderate. This policy is beneficial for the market-oriented reform of the renminbi’s (RMB) exchange rate. China continues to advance the RBM’s internationalization, promoting and developing local and foreign currencies in onshore and offshore markets.
Control of the industrial supply chain
According to the Chinese government, the industrial and supply chain’s security and stability are the foundation for new developments. Major industry problems, from fundamental issues to complex weak points, need to be solved to strengthen the economy.
Leverage of financial technology
PBOC carries out digital currency pilot programs to encourage credit reporting in digital finance and economic governance, to combat and monitor money laundering.
The Chinese government needs to promote employment and shared prosperity, improve social security, optimize income distribution structure, and expand middle-income groups. For this to happen, the government needs to invest in education, forming a strong domestic market, rationally guiding consumptions, savings, and healthcare. China continues to invest in the digital economy and new infrastructure to strengthen unified planning and macro guidance. Therefore it is necessary to overall plan industrial layouts and to avoid repeated destruction of emerging industries.
Reforming and opening-up of the financial sector and the economic socialist market system
China wishes to improve diversified channels for bond default disposal and implement a prudential management scheme for real estate finance and a high-level socialist market economic system. This involves participation in global financial governance, expanding the two-way opening-up in the financial sector and the capital market, and keeping the foreign exchange reserve scale stable. China is also considering joining the Comprehensive and Progressive Trans-Pacific Partnership Agreement, keeping in mind the importance of using internationally accepted rules to maintain national security.
Improvement of the macro-prudential policy framework
For a faster improvement, China brings major financial activities, institutions, markets and infrastructures under macro-prudential management, improving financial holding companies’ supervision system.
Combatting monopoly and unfair competition is an inherent requirement for improving the socialist market economy system. The Chinese State supports the innovation and development of platform enterprises as well as public and non-public economies. While enhancing international competitiveness, it is necessary to regulate under the Chinese law and improve digital rules, such as data collection and consumer rights.
Prevention and diffusion of financial risks
The PBOC takes measures to enhance prudential supervision of financial activities of internet platform companies. This strengthens an anti-trust push, prevents the disorderly expansion of capital, and improves inclusive financial services.
Advance of green finance
One of the global hot topics is carbon neutrality. Just as the European Commission, China has familiar carbon neutrality goals in mind: achieving carbon neutrality by 2060. China channels more financial resources toward green development for the green future, promoting a carbon emission trading market and continuing international green finance cooperation.
With or without COVID-19 in mind, doing business with China can be challenging. However, with adequate preparations, you can get off to a great start in a country known for global trade and healthy economies. Are you curious about your opportunities? Feel free to talk to us; we are happy to help you on your way or find someone who can assist you.
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