Why do financial powers need a strong central bank

2024-08-02

The central bank is the backbone of the financial system, and the modern central banking system is an important component of the modern national governance system. The central bank is closely related to other key core financial elements that a strong financial country should possess, and provides important support for other elements. The central bank is able to regulate the supply and circulation of money, maintain currency stability by improving the mechanism of basic currency injection, which is a necessary condition and basic guarantee for the renminbi to become a "powerful currency". The central bank can promote the diversification and high-quality development of financial institutions based on the laws of economic and financial development; Through efficient liquidity management, scientific business guidance, and penetrating supervision, various financial institutions can be promoted to strengthen division of labor and cooperation, achieve complementary advantages, enhance their ability to serve the real economy, and create a "powerful financial institution". Under the gradually improved macro prudential policy framework, the central bank can collaborate with financial regulatory departments to achieve full coverage of financial supervision and achieve "strong financial supervision". The central bank can promote the deepening of financial system reform internally, orderly promote capital account opening and RMB internationalization externally, and lay a solid institutional foundation for cultivating and forming a "strong international financial center". The central bank needs a large number of high-quality financial talents to formulate and implement monetary policies and participate in international economic and financial governance, which inherently requires forging a "strong team of financial talents". A strong central bank is reflected in its ability to allocate resources and coordinate policies effectively. Through financial regulation, it can scientifically coordinate different goals of monetary policy and achieve efficient economic and financial governance. To build a strong central bank, we must always adhere to the centralized and unified leadership of the Party Central Committee, and uphold the fundamental purpose of financial services for the real economy; With the goal of building a modern financial system with Chinese characteristics, we will deepen the structural reform of the financial supply side and promote high-level financial opening up; Accelerate the construction of a modern central banking system and promote the improvement of a modern monetary policy framework; Effectively maintain currency and financial stability, and create a favorable monetary and financial environment for sustained economic recovery, improvement, and high-quality development. Building a strong central bank is not a one-day effort, it needs to be closely focused on the goal and task of building a strong financial country, gradually and persistently. On the one hand, we need to improve the framework of modern monetary policy with Chinese characteristics and establish a sound and scientific financial regulation system. A scientific and stable financial regulation system is an important guarantee for the Party to manage finance and an important part of building a strong financial country. We must prioritize currency stability and adhere to the fundamental purpose of financial services for the real economy. Establish a dual pillar regulatory framework of monetary policy and macroprudential policy, and coordinate the achievement of the dual goals of currency stability and financial stability. Improve price based monetary policy tools and gradually form a monetary policy regulation mechanism that is mainly based on price based regulation and supplemented by quantity based regulation. Continue to deepen the market-oriented reform of interest rates and exchange rates, improve the formation and transmission mechanism of market-oriented interest rates, pay attention to the decisive role of the market in exchange rate formation, and achieve a balance between internal and external equilibrium. Enrich and improve the toolbox of structural monetary policy, increase support for major strategies, key areas, and weak links, and focus on five major areas: technology finance, green finance, inclusive finance, pension finance, and digital finance. Strengthen expectation management, enhance communication with the public, and improve the efficiency of monetary policy. On the other hand, we need to improve the macro prudential management system and establish a long-term mechanism to maintain financial stability. Maintaining financial security is an important guarantee for building a strong financial country and an important foundation for stable and healthy economic development. Better fulfill the function of the central bank as the lender of last resort, strictly limit the conditions for the use of central bank funds, cooperate with relevant departments and provinces with relatively concentrated high-risk institutions to formulate and implement reform insurance plans for small and medium-sized banks, further reduce the number and risk level of high-risk institutions, and supplement capital through multiple channels. Improve the macro prudential policy framework, based on the principles of relevance, measurability, and controllability, clarify the macro prudential policy objectives, promote the formation of a scientific and effective macro prudential policy transmission mechanism, and enhance the efficiency and effectiveness of macro prudential policy implementation. Establish a comprehensive financial risk monitoring and early warning system, and create targeted policy tools. Based on the characteristics of financial risks, we will steadily expand the coverage of macroprudential policies and gradually include major financial activities, financial markets, financial infrastructure, and non bank financial institutions in macroprudential management. (New Society)

Edit:Xiong Dafei    Responsible editor:Li Xiang

Source:China.org.cn

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