To understand the mechanism of the Chinese
Economy and the reports released by the Chinese government, this series is
particularly designed for all readers who are willing to learn more about the
Chinese economy, identify risks and opportunities of markets in China, study
and research for your course about China, enhance your knowledge for a future
career, and obtain the important signal of China. This series will present key
financial terms that you must know before reading any official documents
released by the Chinese government.
Macro
leverage (宏观杠杆率)
The macro
leverage ratio is the ratio of a country's total debt to GDP. The macro
leverage ratio is generally measured by the ratio of the debt balance of the
non-financial enterprise sector (hereinafter referred to as the enterprise
sector), the government sector, and the household sector to the gross domestic
product (GDP).
The leverage
ratio of government departments is calculated by dividing the debt of
government departments by the nominal GDP. It can be further divided into the
central government leverage ratio and the local government leverage ratio.
The
calculation of the leverage ratio of the residential sector is to divide the
debt of the residential sector by the nominal GDP.
A new
framework of "three levels and two advantages" reserve ratio (“三档两优”准备金率新框架)
"Three
levels" refers to setting the deposit reserve ratio into three benchmark
levels according to the importance of the financial institution system, the
nature of the institution, and the service positioning.
The first
level is the deposit reserve ratio of large banks, reflecting the requirements
of preventing systemic risks and maintaining financial stability.
The second
tier is the deposit reserve ratio of medium-sized banks, which is slightly
lower than the first tier. Medium-sized banks mainly include joint-stock
commercial banks and urban commercial banks;
The third
tier is the reserve ratio of small banks, including rural credit cooperatives,
rural cooperative banks, rural banks, and rural commercial banks serving
counties.
"Two
advantages" means that there are two advantages on the basis of the three
benchmark grades:
(1) banks in the first and second grades who meet
the assessment criteria for the targeted reduction of the reserve ratio of
inclusive finance can enjoy a deposit reserve ratio of 0.5 or 1.5 percentage
points;
(2) banks serving counties that have reached a
certain proportion of new deposits for local loan assessment standards can
enjoy a 1 percentage point deposit reserve ratio discount.
Considering
that the banks serving the county as inclusive financial institutions have
already enjoyed a low-grade deposit reserve ratio, they will no longer enjoy
the preferential assessment of targeted reduction of the reserve ratio of
inclusive finance. After enjoying the "two advantages", the actual
deposit reserve ratio of financial institutions is lower than the benchmark.
Bimodal
regulation (双峰监管)
Under the
Bimodal regulatory model, the prudential regulatory authority is specially
responsible for the prudential operation and solvency supervision of the
regulated, including the supervision of capital adequacy, liquidity,
non-performing assets, and finance;
The behavior
supervision institution is responsible for the behavior supervision of
financial institutions and the protection of financial consumers, and finally
implements the regulatory goal of "the buyer is responsible and the seller
is responsible".
Each
regulatory agency has clear and simple objectives, a clear division of responsibilities,
smooth coordination, and easy accountability. The "double peak"
regulation avoids the main defects of institutional and functional supervision
and is an effective institutional arrangement.
Hope you enjoy the learning. For more information, please click the label "China Financial Key Terms" on the left bar to see the whole series.
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