China's central bank outlines policy priorities for 2020

China's central bank mapped out key policies and tasks for 2020 during an annual work conference held in Beijing from Jan 2 to Jan 3.

The People's Bank of China (PBOC) said in an online statement released after the tone-setting meeting that the policies are set to, among other things, ensure sound monetary and financial conditions in 2020, as China enters homestretch to securing a decisive victory in building a moderately prosperous society in all respects.

The following are some key policy takeaways:

Prudent, moderately flexible monetary policy to stay

China will strengthen its counter-cyclical adjustments and maintain reasonably abundant liquidity in the banking system. The PBOC also highlighted market-based interest rate reform and advancing the issuance of perpetual bonds by banks for replenishing capital.

China will continue to let the market play a decisive role in exchange rate formation and keep the renminbi's exchange rate generally stable at a reasonable and balanced level.

Winning the battle in forestalling, defusing major financial risks

China will establish and improve mechanisms regarding the recovery, loss sharing, as well as incentives and constraints of financial institutions. Work will continue in addressing the risks of major financial institutions in accordance with laws and regulations.

The PBOC also stressed continuous special operations in addressing internet financial risks and faster progress in establishing a long-term management scheme for real estate finance.

Greater financial support for supply-side structural reform to ease strain for small businesses

Work on this front will include better use of policy tools including targeted reserve requirement ratio, re-lending and rediscount to effectively improve financing to small and micro firms.

Efforts will be made to shore up credit support to key areas and the weak links. The PBOC will focus on areas with extreme poverty and better energize local industries with financial support to help the country win the battle against poverty.

Faster improvement in macro-prudential management

The PBOC will establish a stress testing system for macro-prudential management, and speed up the introduction and improvement of an integrated macro-prudential management mechanism of cross-border capital flow for local and foreign currencies.

Assessment on systemically important banks will be conducted, and efforts will be made toward the introduction of measures regarding the supervision and management of financial holding companies.

Higher level of financial reform, opening-up

The PBOC points to energetic efforts in developing the country's bond market and continued progress in improving the connectivity among bond market infrastructures.

Meanwhile, China will make active and prudent efforts to advance the internationalization of renminbi, and support trailblazing efforts on deepening foreign exchange management system reform in the country's pilot free trade zones and free trade ports.

Stronger fintech R&D

In 2020, China will work to establish and improve the basic rules for financial technology (fintech) supervision, and do a solid job in the pilot program of fintech innovation and supervision.

The PBOC will steadily advance the research and development of China's legal digital currency.

Boosting financial services, management

Efforts will be made to deepen reform in areas including science and innovation finance, green finance and inclusive finance.

The country will strengthen the development of the anti-money laundering coordination mechanism, and continue to strengthen anti-money laundering supervision.