China’s central bank and Suzhou municipal government help JD.com test digital currency for online purchases in December 2020. Photo: Courtesy of JD.com
China has no structural shortcomings that could trigger a subprime mortgage crisis like the one that occurred in the United States in 2007, as housing demand from urban and rural residents in the country continues to rise. as part of regulatory measures to prevent and deal with risks in the real estate market, the former head of the People’s Bank of China (PBC) said on Sunday.
Dai Xianglong, former governor of the PBC, the central bank, made the remarks at a financial summit hosted by iFeng news in Shanghai while talking about China’s modern financial development over the next five to ten years.
Dai said the central bank announced the reduction of the reserve requirement ratio for commercial banks aimed at increasing market liquidity, after the Political Bureau of the Communist Party of China Central Committee held a meeting on Dec. 6, proposing to “ promote housing construction and support the commercial housing market to better meet the needs of buyers”.
The decision will effectively control and reduce risks in the real estate industry and promote the healthy development and positive operation of the industry, Dai said.
As of October 8, China has opened 123 million yuan digital wallets with a total transaction value of 56 billion RMB.
Mr. Dai said that the internationalization of the yuan is a long process and that the authorities should redouble efforts to facilitate its convertibility, improve overseas settlement and develop offshore markets, in order to increase the recognition of the Chinese currency in the international financial community.
Dai noted that the internationalization of the yuan is not a challenge for the dollar, since the latter is still the world’s main currency and has been for a long time and China wants it to remain stable.
However, the US economy and gold reserves have weakened in the face of a rapidly growing deficit, and the dollar will likely maintain a long-term downward trend. According to Dai, the US government issued $29 trillion in debt, inevitably leading to inflation and driving up world prices. China’s macro-financial regulation should prevent severe inflation as monetary circulation accelerates.
Dai encouraged the authorities to establish a social financing system that effectively combines indirect and direct financing to improve the efficiency of the use of social funds, in addition to developing Shanghai as an international financial center.
Dai said China’s modern financial construction is a key part of the reform and development of China’s financial industry, and the US government cannot hinder its acceleration.
In the future, China will continue to oppose and respond to the US containment of China’s modern financial development, as well as promote international currency diversification, further increase China’s voice in financial affairs. international markets and maintain the stability of the international financial order, Dong said.