22 April 2019
Central bank governor Yi Gang said sorry for making it harder for private enterprises to secure their funding needs. Photo: Bloomberg
Central bank governor Yi Gang said sorry for making it harder for private enterprises to secure their funding needs. Photo: Bloomberg

PBoC chief’s rare move of admitting policy error

China’s central bank chief has admitted publicly that “we were not very thoughtful when making some policy decisions in the past, lacking in coordination and there was a deviation in policy implementation as well”.

Governor Yi Gang apologized for having made it harder for the private sector to secure their funding needs.

Yi pledged that the People’s Bank of China will put an emphasis on field research and surveys, and listen more closely to the voice of private firms.

It’s rare for a high-ranking official like the central bank governor to admit mistakes in public.

It sent the signal that the Chinese economy is facing some serious challenges. Yet it also indicates the authorities are determined to rectify the situation to avert an economic downturn.

Both central and local governments have unveiled various measures to restore the confidence of the private sector.

Last month, Vice Premier Liu He, as well as top financial regulators such as chairman Liu Shiyu of the China Securities Regulatory Commission and chairman Guo Shuqing of the China Banking Regulatory Commission, voiced support for private enterprises.

Liu He, who is the top economic advisor to President Xi Jinping, bluntly said that the policy direction for private firms has stoked concerns that Beijing is favoring state-owned companies, and that needs to be corrected.

Meanwhile, local governments have set aside funds worth hundreds of billions of yuan to support private enterprises.

During a meeting with entrepreneurs on Nov. 1, Xi stressed that the private economy would only get “stronger” and could not be “weakened”.

He promised substantial tax cuts, lower funding costs, and a fair market environment for private companies.

Beijing’s pledge of support for the private sector and concrete policy moves definitely brighten the long-term outlook. Positive comments from top leaders will also speed up the implementation of the new policy direction at the local government level.

Guangdong province has unveiled 10 measures to boost the private economy. These measures include facilitating financing for private firms and direct financial subsidies.

In the short run, however, the impact of these moves would be limited because it takes time for business confidence to recover.

And the recovery will be impeded by macro uncertainties like the Sino-US trade war and a weakening Chinese currency.

This article appeared in the Hong Kong Economic Journal on Nov 8

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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