Abstract
Our authorities would like to thank staff and management for the constructive policy dialogue during the China 2022 Article IV Consultation. We appreciate staff’s professionalism and hard work, and value staff’s comprehensive and well-focused analyses. Against the backdrop of the ongoing COVID-19 worldwide and turbulent external environment, in 2022, China effectively coordinated its COVID-19 responses and socioeconomic development, and the economy stabilized and began to recover. Going forward, China will further optimize its coordination in COVID-19 responses and socioeconomic development, focus on stabilizing growth, employment, and prices, keep economy operations within a reasonable range, promote further economic recovery and stability, and ensure green and high-quality economic growth.
Our authorities would like to thank staff and management for the constructive policy dialogue during the China 2022 Article IV Consultation. We appreciate staff’s professionalism and hard work, and value staff’s comprehensive and well-focused analyses. Against the backdrop of the ongoing COVID-19 worldwide and turbulent external environment, in 2022, China effectively coordinated its COVID-19 responses and socioeconomic development, and the economy stabilized and began to recover. Going forward, China will further optimize its coordination in COVID-19 responses and socioeconomic development, focus on stabilizing growth, employment, and prices, keep economy operations within a reasonable range, promote further economic recovery and stability, and ensure green and high-quality economic growth.
I. COVID-19 Containment in China
China has been refining its COVID-19 response measures in a safe, steady, and appropriate manner, largely in line with staff’s advice. It adjusts its COVID-19 polices in a dynamic manner, rather than seeking abrupt and sudden changes. The adjustment has been broadly anticipated and expected. Since the outbreak of COVID-19, the government has put the people and their interests first, as nothing is more precious than people’s lives. Based on China’s actual conditions, we timely developed the dynamic zero-COVID policy that has well served the interests of the overwhelming majority of the Chinese people. During the time when the virus posed the greatest danger, our COVID-19 policy effectively protected people’s lives and health. As correctly pointed out in the staff report, the dynamic zero-COVID policy allowed the economy to swiftly bounce back since early 2020, while maintaining the rates of severe cases and death at remarkably low levels. It has also allowed China to significantly expand the global supply of medical goods, which contributed to the global response to COVID-19, and to meet the increased demand for durable goods at a critical time for the global economy. In the past three years, China has developed effective therapeutics and medicines. China’s capacity to test, treat and epidemiologically survey COVID-19 have continued to improve. Significant progress was achieved in vaccine development and vaccination, with the full vaccination rate of the whole population exceeding 90 percent. Globally speaking, China has had the lowest rates of severe cases and mortality. Over the past three years, average life expectancy in China went up from 77.3 to 78.2 years.
Currently, with Omicron being much less virulent and deadly, coupled with China’s increasing capacity to test, treat and vaccinate, China has proactively refined its COVID response measures. Considering the features of the Omicron variant and people’s need to travel during the Chinese New Year, the authorities has effectively balanced the need to contain COVID-19 and the social and economic considerations after a science-based assessment. We have refined the measures in an orderly fashion and issued steps to treat COVID-19 as a “Class-B” instead of “Class-A” infectious disease, shifting the focus of our responses from stemming infection to prevention and treatment of severe cases and caring for health. This shift of policy is science-based, timely, and necessary. The aim is to protect the lives and health of the people and minimize the impact of COVID-19 on economic and social development to the greatest extent possible.
Countries adjusting their COVID-19 policy invariably go through a period of adaptation, and China is no exception in shifting gear. The situation is improving and the pressures on the public health system are under control. Many provinces and cities have already gone through the first wave by now, where work and life are gradually returning to normal. The authorities have made scientific assessments of the potential peaks in other locations. They have made necessary preparations and are confident that this process of policy adjustment and shifting of focus will continue in a steady and orderly manner.
We will continue working with the international community to combat COVID-19 globally, better protect people’s lives and health, revitalize world economic growth, and build a global community of health for all. Meanwhile, we call on the international community to refrain from politicalizing COVID-19 issue and avoid any discriminated measures against travelers from China.
II. Recent Economic Developments in China
In 2022, China made an effort to coordinate measures to contain COVID-19 and promote socioeconomic development, which has stabilized macroeconomic performance and allowed the economy to operate within an appropriate range. In the first three quarters of 2022, China’s real GDP grew by 3.0 percent. In the fourth quarter, given the multi-faceted challenges including the increasingly complicated and challenging international environment, as well as frequent and widespread domestic outbreaks, China carried out effective policy measures to stabilize the economy, generally maintaining the momentum of recovery.
First, agriculture and industrial production grew steadily. The total grain output in 2022 reached a new high of 686.5 million ton, up by 0.5 percent year on year (YoY). Impacted by multiple f actors including COVID-19, the growth of industrial production slowed slightly in November. That said, the accumulated industrial output of the first eleven months of the year grew steadily over the same period last year, with the value-added of industrial enterprises above the designated size increasing by 3.8 percent YoY. Second, fixed asset investment scaled up. Fixed assets investment (FAI) in the first eleven months of the year increased by 5.3 percent over the same period last year, and investment in large projects increased relatively fast. Third, market prices remained stable. Despite the significant increase in the global food and energy prices and relatively large imported inflationary pressures, the CPI only went up moderately. Th e headline and the core CPIs increased by 1.6 and 0.6 percent YoY respectively in November 2022. Fourth, new growth momentums were further strengthened. The high-tech sectors saw fast growth. In the first eleven months of 2022, the value-added of high-tech manufacturing sector went up by 8.0 percent YoY, which is 4.2 percentage points higher than that of the whole industrial enterprises. Fifth, China continued to promote the high-level opening-up. Against the backdrop of increasing downside risks in the world economy and weakening momentum of global trade, China proactively promotes free trade and investments. In the first eleven months of 2022, the value of trade in goods (in RMB terms) grew by 8.6 percent over the same period of 2021, with the value of exports and imports up by 11.9 and 4.6 percent respectively. The value of trade in services increased 15.6 percent, with the value of imports and exports up by 15.6 and 15.5 percent respectively. The actual utilized FDI increased by 9.9 percent YoY in the same period. The overall balance of payments in China remained broadly balanced. The strong performance of trade and FDI showed resilience and robustness of China’s external sector, which further increased the resilience and reliability of the global supply chains. According to a recent survey with more than 160 foreign enterprises and chambers of commerce operating in China, as conducted by the China Council for the Promotion of International Trade (CCPIT), 99.4 percent of surveyed enterprises showed stronger confidence about China’s economy in 2023. Moreover, 98.7 percent of them intended to maintain or expand their investments in China, 89.8 percent aimed at retaining their industrial chains in China, and 10.2 percent planned to transfer their overseas industry chains to China.
At present, the global economic growth is slowing down, inflation remains elevated, and geopolitical conflicts continue. The external environment is volatile and complicated, and the foundation for domestic economic recovery is not yet solid. The triple whammy of demand contraction, supply shocks, and weakening expectations are still weighing on the economy. We are confident, however, that China’s economy has strong resilience, massive potential, and strong vitality. As policy measures to stabilize the economy continue to take effects, the overall economic performance is expected to pick up in 2023. The government will make an effort to better coordinate supply-side structural reforms and measures to expand domestic demand, create effective demand through high-quality supply, and support the expansion of domestic demand in various ways and channels. Therefore, we suggest that staff fully consider a number of factors in making their growth projections, including China’s COVID-19 situation which has been gradually stabilized, its sufficient policy space, and potential policy adjustments in the future.
The 20th CPC National Congress has outlined China’s overall development objectives for 2035, including significantly increasing its economic power, improving its scientific and technological capabilities, and enhancing its comprehensive national strength, so as to reach the per capita GDP of mid-level developed countries by 2035. In this context, we think staff’s projections of China’s growth in 2023, 2024, and in the medium-to long-term are overly pessimistic. We welcome the revision of China’s growth for 2023 to 4.2 percent from 3.8 percent in staff’s supplementary note (staff’s projections as of time of the Board meeting), though we hold a more positive view about China’s growth. There are many positive elements in China’s outlook, including the large market size, complete industrial chains, resilient economy, and the well-educated labor force.
A number of structural changes also support higher and longer growth. For example, changing the “one-child policy” to “three-children policy” will change the demographic path in the medium-to long-term, which will bring more labor force, consumption and investment. To implement China’s “30/60” decarbonization targets, hundreds of trillions of new investments will be needed in the new energy sector alone, meaning that the transformation and adaptation for climate change in China provide huge room for new investment down the road.
To this end, we have confidence that the economy will maintain the medium-to high-speed growth over a relatively long period. Comparing China’s annual growth rate of 6 to 7 percent before COVID-19 with staff’s projection of 5.1 percent in 2024 and around 4 percent afterward, we don’t think the projected slowdown is reasonable.
III. Broader Policy Issues
Monetary Policy
In 2022, by pursuing a sound monetary policy that is flexible and appropriate and maintaining its continuity, stability, and sustainability, the People’s Bank of China (PBOC) has properly managed market expectations, made practical efforts to support the real economy, and effectively prevented and controlled financial risks.
First, the PBOC kept liquidity adequate at a reasonable level. In 2022, the PBOC cut the reserve requirement ratio twice by a total of 0.5 percentage point, releasing more than RMB 1 trillion of long-term funds, and provided liquidity support through multiple channels such as central bank lending, rediscounts, the Medium-term Lending Facility (MLF), and Open Market Operations (OMO). In November 2022, the YoY growth of money supply (M2 ) and aggregate financing to the real economy (AFRE) was 12.4 percent and 10 percent respectively.
Second, the structural monetary policy toolkit was enriched and improved. The PBOC raised the incentive funding ratio for local financial institutions issuing inclusive micro and small business (MSB) loans, increased the special central bank lending for clean and efficient coal use, and introduced three new structural tools, namely central bank lending for sci-tech innovation, for inclusive elderly care services, and for transportation and logistics.
Third, the market-oriented interest rate reform was deepened. The lending prime rate (LPR) reform was further promoted, and the guiding role of the LPR was brought into play. The one-year LPR was guided down from 3.8 percent to 3.65 percent in 2022. In September 2022, the average interest rate on loans to enterprises averaged 4.0 percent, decreasing by 0.59 percentage point YoY and hitting the lowest level on record.
Forth, efforts were made to promote both the internal and external balance. While deepening the market-oriented reform of the exchange rate and maintaining the decisive role of the market in the RMB exchange rate formation, the PBOC enhanced the two-way flexibility of the RMB exchange rate, strengthened macroprudential measures and expectation management, and let the exchange rate play its role in macroeconomic management and as an auto stabilizer for the international balance of payments. In 2022, from the beginning of the year to November, the RMB was on the depreciating path against the U.S. dollar. From November 2022 to mid-January 2023, the RMB is on the appreciating path against the U.S. dollar. The RMB exchange rate clearly fluctuated in both directions. We concur with staff’s preliminary assessment that China’s external position in 2022 is broadly in line with the level implied by medium-term fundamentals and desirable policies. To further deepen the development of foreign exchange market to facilitate high-level opening-up, the PBOC and the State Administration of Foreign Exchange (SAFE) decided to extend the trading hours of the interbank foreign exchange market to 3:00 a.m. from January 3, 2023, in an attempt to cover more trading hours in Asian, European, and North American markets. The adjustment will expand the depth and width of the domestic foreign exchange market, promote the coordinated development of onshore and offshore foreign exchange markets, provide more convenience to global investors, and enhance the attraction of RMB assets.
Moreover, the PBOC included the e-CNY in circulation in calculating currency in circulation (M0). As of end-December 2022, the e-CNY in circulation stood at RMB13.61 billion.
In 2023, China will continue the sound monetary policy and make it more targeted and effective. The PBOC will keep liquidity adequate at a reasonable level, maintain the growth of money supply and AFRE broadly in line with nominal economic growth, and guide financial institutions to provide stronger support to MSBs, technology innovation, and green development. China will also keep the RMB exchange rate basically stable at an adaptive and equilibrium level as well as strengthen arrangements to safeguard financial stability.
Fiscal Policy
Proactive fiscal policy became more effective and efficient. The authorities made the policy more targeted and sustainable. In 2022, China’s fiscal policy rightly focused on supporting market entities through tax cut, fee reduction, tax rebates, and tax/fee deferrals, the total amount of which exceeded RMB 4 trillion (USD 580 billion). China also expanded its financing guarantees and provided more support to SMEs via government procurement. The logic is that if the market entities can weather COVID-19 smoothly with fiscal support, then stability can be achieved in terms of employment, people’s livelihood, supply chains and overall prices. In December 2022, China issued RMB 750 billion (USD 108 billion) worth of special treasury bonds to raise funds to support economic and social development. China expedited the pace to issue local-government special-purpose bonds. As of end-November 2022, the accumulated issuance of newly approved special bonds reached RMB 4 trillion (USD 580 billion). Fiscal support was also provided to facilitate policy-based developmental financial tools, guarantee the delivery of pre-sold real estate projects, and support equipment upgrade in certain sectors. The overall planning of financial resources was enhanced. The authorities also kept a relatively high level of expenditure and sped up its implementation, improved the system for the regular transfer of direct fiscal funds, ensuring the expenditure need in key areas, and provided direct support to vulnerable households and communities by ensuring the “Three Guarantees” at the grassroots level, i.e. guaranteeing people’s basic livelihood, their wages, and the operation of local governments. Many provincial and municipal governments have also provided vouchers to residents to stimulate consumption.
In 2023, the proactive fiscal policy will be stepped up and made more effective. The expenditure intensity will be maintained, with a better mix of tools including fiscal deficits, special-purpose bonds, and interest subsidies. While high-quality development will be effectively supported, fiscal sustainability will be ensured and local government debt risks well controlled. China will also enhance transfers from central to local governments and continue the “Three Guarantees”. Meanwhile, the authorities will prevent and address local government debt risks, contain emerging risks decisively, and resolve existing risks properly.
We still have different views with staff’s concept of “augmented deficit/debt” and assessments. They are inconsistent with China’s practices and official data, and in many cases would lead to misjudgment of China’s fiscal policy stance. A major reason for the disagreement lies in the treatment of local government financing vehicles (LGFVs) debts issued after 2014. It is important to note that such debt is squarely borne by the issuing entities themselves, not the government. China’s Budget Law, Company Law, and other relevant laws have clearly defined the boundaries and differences between local government debt and LGFV debt. Local governments do not bear the responsibility to repay the debt of LGFVs and other state-owned enterprises (SOEs) since the implementation of the amended Budget Law in 2014, including the implicit debt illegally borrowed by LGFVs. The augmented fiscal concept misinterprets China’s fiscal position. For example, in 2021, China implemented a supportive fiscal policy, but staff used the augmented fiscal concept and identified China’s fiscal policy stance as significantly contractionary. We hope staff can continue their constructive communication with China’s fiscal authorities on this issue, focusing on specific policy issues rather than conceptual issues.
Preventing and Defusing Financial Risks
In 2022, China’s financial system remained broadly stable and resilient. The financial regulators took firm measures to prevent systemic risks and upheld market principles and the rule of law in risk resolution, in a bid to continuously mitigate financial risks. In the area of legislation and institutional development, the draft Financial Stability Law has been reviewed by the Standing Committee of the National People’s Congress and is now in public consultation. For the banking sector, China’s financial regulators took proactive measures to help market players mitigate liquidity pressures and default risk, and stabilize the quality of the banking sector’s credit assets. By the end of 2022Q3, the banking sector’s n on -performing loan (NPL) ratio registered 1.66 percent, decreasing by 0.07 percentage point from end-2021. The NPL ratio of inclusive loans to MSBs reached 1.96 percent, decreasing by 0.23 percentage point YoY, and the credit quality was kept broadly stable. The banking sector’s provision coverage ratio stood at 205.54 percent, and the capital adequacy ratio was 15.09 percent, both remaining at a relatively high level, indicating adequate risk buffers.
The Staff Report noted that “the property crisis has intensified during 2022.” But in our view, China’s property market has been operating smoothly in general, and is not in a “crisis” situation. The authorities are aware of the risks and are working to address them. It is inappropriate to overstate the difficulties in the market and potential impacts to the financial sector.
In 2022, the triple pressures of demand contraction, supply shocks, and weakening market expectations, coupled with certain unexpected factors such as the widespread COVID-19, brought China’s property market into a new environment. Certain developers over-relied on the business model of “high debt, high leverage, and high turnover” for a long time. Impacted by COVID-19 and increasing market pressures, they faced liquidity challenges due to depressed sales revenue, difficulty in finding new financing, and capital chains problems, leading to pauses or delayed delivery of some pre-sold projects. However, according to the semi-annual financial statements of listed developers, in the first half of 2022, their liabilities to assets ratio decreased by 0.24 percentage point YoY, the leverage ratio declined slightly, and their financing structure continued to improve. The current development of the real estate market is a natural evolution of “deleveraging and destocking” in the past few years. The related risks are local and only concern individual firms, and their impact on the rest of the world has been relatively small.
The authorities have actively taken actions to support reasonable market financing, as well as to ensure the construction and delivery of pre-sold projects. The total exposures of financial institutions to distressed individual developers are limited and manageable. The Ministry of Housing and Urban-Rural Development, MOF, PBOC, and other authorities have made concrete work plans to actively ensure project delivery and to safeguard the legitimate interests of h om e buyers, using policy tools such as special loans from policy and development banks.
Since November 2022, the regulatory authorities have introduced “three arrows” to support developers, namely bank lending, bond market, and equity financing. All these measures are taking effect. For example, it is reported that around 105 banks have signed heads of loan agreements with 188 developers since last November, with their loans totaling RMB 5.46 trillion. Three private developers have received credit enhancement for bond issuance of RMB 4.7 billion. There are no policy obstacles to restructure the developers. In fact, there were 48 mergers and acquisitions (M&A) for major developers in December 2022, and the transactions totaled over RMB 53 billion.
Staff think there are housing price floors, though this is only partially true and does not reflect the whole picture. The price floors only existed in a few small cities as reported. Recently, the PBOC and the Banking and Insurance Regulatory Committee (CBIRC) issued a guideline allowing banks to lower their mortgage rates without a floor and to reduce the down payment ratio if a city’s housing price decreases for three consecutive months.
In 2023, China will continue to ensure the steady development of the property market. Concrete efforts will be taken to ensure the delivery of pre-sold projects, safeguard people’s livelihood, and maintain steady market development. City-specific differentiated credit policies will be implemented, reasonable financing demand of the sector will be met, and the restructuring and M&A of developers will be pursued. Meanwhile, continued efforts will be made to effectively prevent and defuse the risks of high-quality and leading developers, as well as to improve their balance sheet. People’s basic housing needs and the need for improved housing conditions will be further met based on city-specific policies. China will appropriately address the housing needs of new residents and the young. The establishment of a long-term rental market will be explored. In general, China will stick to the principle that “housing is for living in, not for speculation”, and continue to promote a smooth transition of the property sector to new development models.
State-Owned Enterprises (SOEs) Reform
The uncertainties in the domestic and external environment, combined with the impact of COVID-19, made it more difficult for the authorities to implement so m e structural reforms. This said, the authorities achieved substantial progress in structural reforms. SOE is one of the inseparable elements of socialism with Chinese characteristics. While fighting COVID-19, the authorities completed the Three-y ear Action Plan for SOEs Reforms (2020–2022), with its goals successfully achieved by the end of 2022. The modern corporate governance system has also been continuously refined. China’s SOEs maintained stable and orderly production and operation, with their income and profits steadily growing. In the first ten months of 2022, the operating income, total profit, and net profit of central SOEs amounted to RMB 32.3 trillion, 2.2 trillion, and 1.7 trillion respectively, representing YoY growth of 9.9 percent, 4.7 percent, and 3.9 percent. The number of China’s SOEs on the Fortune Global 500 List has increased from 65 in 2012 to 99 in 2022. China’s SOEs operating in the communications, power, and construction sectors are among the most efficient around the globe.
On promoting the development of private enterprises and competitive neutrality, China has reiterated its commitment to “working unswervingly both to consolidate and develop the public sector and to encourage, support, and guide the development of the non-public sector”. In recent years, China’s private enterprises have developed rapidly. The total number of private enterprises in China has increased from 10.86 million in 2012 to 47.01 million in August 2022, accounting for 93.3 percent of all enterprises, up from 79.4 percent in 2012. Specifically, the net increase in the number of private enterprises since 2020 is 11.85 million, accounting for one third of the total net increase in the past decade. Private enterprises have played an important role in stabilizing growth, promoting innovation, increasing employment, and improving people’s livelihood. They have become an important driver of economic and social development.
As most of the enterprises in China are private-owned an d many of them are micro and small business (MSB), fiscal and monetary policies have focused on supporting the MSB in the past few years, with a number of measures introduced. For example, for the monetary policy, China encourages commercial banks to extend inclusive loans to MSB. The MSB loans have seen an average YoY growth of 25 percent in the past 5 years, significantly faster than China’s total loans (around 11 percent) and MSB loans in the rest of the world.
In light of the above developments, we have different views on staff’s assessments that “ productivity growth is weak, in large part because of the role of low-productivity SOEs,” and “reforms securing competitive neutrality between SOEs and privately owned firms have been lacking.” Going forward, China will continue to deepen the reform of state-owned assets and enterprises and enhance their core competitiveness. China will maintain the principle of “reforming SOEs in line with their categories”, and strike a proper balance between the economic and social responsibilities of SOEs. China will continue improving SOEs’ modern corporate governance with Chinese characteristics and keep SOEs operating in accordance with the market-oriented mechanism. The Chinese authorities will establish legal and institutional arrangements to ensure the equal treatment of private enterprises and SOEs, and encourage the development of the private sector via policy supports and public opinions . Property rights of private enterprises and the interests of entrepreneurs will be protected according to law.
Moreover, China ‘s companies, either state-owned or private, are victims of unfair competition policies of other countries, including technology and supply restrictions under the name of “national security”, industrial subsidies to create competitive advantages, and market access restrictions targeting Chinese companies. A healthy exchange of views between China and its trade partners will be helpful and constructive. China has articulated its commitment to providing maximum convenience to foreign entrepreneurs as they carry out trade and investment activities and do business in China. We should build and trust a well-functioning multilateral trading system. We encourage staff to make more comprehensive analyses on the business environment of Chinese SOEs, private enterprises, and foreign enterprises.
The Staff Report mentions that “SOEs are being tasked to make advances in strategically important sectors and technologies affected by growing geo-economic pressures, further burdening them with responsibilities.” In fact, with geopolitical tensions and fragmentation risks on the rise, not only SOEs but also private enterprises in China have been forced to seek “plan B” and alternatives to prevent and mitigate risks of sudden input cuts from trading partners. For a company, whether or not to have a plan B is a matter of life and death.
Social Protection and Poverty Reduction
In recent years, China has introduced a series of measures to promote employment, increase households’ income, strengthen the social protection system, and enhance support to vulnerable communities. Support from public pension funds, public medical insurance, and the social assistance system have been strengthened, and “common prosperity” has been strongly promoted. Thanks to various policies to combat poverty and to the rural revitalization strategy, per capita disposable income of rural residents continues to grow faster than that of urban residents. In 2021, the ratio of urban/rural income was 2.50, down by 0.06 compared to 2020, further narrowing the relative gap between urban and rural income levels.
Staff note that “it will take the systematic strengthening of the social protection system to sustain high quality growth”, and that indeed is a key task China is currently working on. In January 2022, China began to strengthen the nationwide coordination of social pension for enterprise employees, aiming at adjusting the surplus and deficit of inter-regional pension funds for enterprise employees at the national level. The authorizes are now quickening the pace in this endeavor. The above measures have addressed the structural problems of regional pension funds at the system level, which secures pension payments in regions with hardships. In November 2022, commercial endowment insurance, the third pillar of China’s pension system, was introduced. This is a vivid example of China’s response to its aging population and its effort to improve the multi-layer pension system.
Staff point out that “China’s social protection system still provides significantly less coverage and lacks in adequacy compared to other countries at similar or higher per capita income levels”. This statement does not accurately describe the reality. China has established the largest social protection system in the world. In terms of pension system, China continues to promote the gradual increase of social pension benefits for both urban and rural residents, so that covered residents could sh a re China’s economic and social development. As of 2022, the public pension system covered 1.04 billion residents. In terms of medical insurance, the public medical insurance system covers 95 percent of Chinese residents. China has included more outpatient expenses for common and chronic diseases into the medical care reimbursement list. In terms of unemployment insurance, its coverage was temporarily expanded in 2022, so that the system can provide temporary allowances to unemployed migrant workers who have been covered for less than one year.
Opening -Up and International Cooperation
In the wake of the COVID-19, China has adopted a range of pro-business policies that apply equally to all companies registered in China. China has been resolutely pushing forward with the opening-up of the financial sector, The measures include enhancing the management of funds invested by overseas institutional investors in China’s bond market, improving management of proceeds from RMB-denominated bond issuance of overseas institutions, and steadily improving institutional arrangements for opening-up with regards to rules, regulations, management, and standards, in order to create a market-oriented, law-based international business environment. China has strengthened the protection of physical and intellectual property, the legal rights, and the interests of foreign investors. These measures have provided them with higher-quality services and have improved business environment for them. China will continue its efforts along this line.
China is willing to carry out constructive cooperation with the IMF and other countries to support developing countries, especially the low-income countries, to promote their economic recovery. The Belt and Road Initiative (BRI) has become a highly welcomed international public good and a platform for practical cooperation. Broad international consensus has been achieved on the Global Development Initiative (GDI) and the Global Security Initiative (GSI) to seek common development and shared security. Chinese vaccines have played a key role in the global fight against COVID-19. In implementing the G20 Debt Service Suspension Initiative (DSSI), China has provided the largest amount of debt service suspension among G20 countries. China has also been actively participating in the G20 Common Framework, for which it has served as cochair in two of the three cases. Through these tangible actions, China has made its active contribution in supporting low-income countries to combat COVID-19 and address the debt issue.
As risks in the world economy are accumulating and protectionist measures are on the rise, China will only continue to open up and deepen international cooperation. We believe openness is the only way to achieve social prosperity and progress, whereas protectionism will only boomerang. China would work with other countries to uphold the multilateral trading system with the World Trade Organization at its core, build an open world economy, and in particular take forceful measures to maintain the stability and resilience of the global industry and supply chains. The best way to address emerging global challenges is to make concerted efforts. Countries may have different views, but it is important that we enhance mutual understanding on the basis of equality and respect.
Climate Change
China has made a solemn commitment to carbon neutrality and has included climate efforts into the new 14th Five-Year Plan. The path toward carbon neutrality is not a linear one. The authorities have established the policy framework to achieve carbon peaking and carbon neutrality goals, formulated the strategy to control medium- an d long-term greenhouse gas emissions, and prepared and implemented the national strategy for climate adaptation. The national carbon emission trading schemes (ETS) made its debut in July 2021 and has been operating in a smooth and orderly manner, with its trading scope gradually expanded.
China has made great efforts in developing non-fossil energy and has accelerated the transition to green and low-carbon energy. As coal remains a major source of energy in China, the authorities continue to promote the clean and efficient utilization of coal. According to preliminary statistics, in 2021, the CO2 emissions per unit of GDP in China was 3.8 percent lower than that in 2020, and 50.8 percent lower from 2005. Meanwhile, non-fossil energy accounted for 16.6 percent of total primary energy consumption, and the coal consumption per unit of GDP has decreased significantly.
In recent years, China has actively practiced the philosophy of green development and keenly promoted green finance. At the end of 2022Q3, China has the world’s largest outstanding green loans of around RMB 20.9 trillion, up by 41.4 percent YoY. The outstanding green bonds in China exceeded RMB 1.26 trillion. The PBOC has introduced supportive tools to reduce emissions, provided financial incentives to qualified financial institutions, and guided financial institutions to extend loans to key sectors with strong reductions in emission. When implementing these measures, the authorities have ensured equal and national treatment for foreign financial institutions.
As a next step, China will continue to build a low-carbon, safe, and efficient energy system, further develop green finance, and promote international cooperation on global climate governance. Staff estimate that China is set to overachieve its own carbon-peaking target, and we welcome this assessment. We commend staff for their in-depth analyses of climate change issues and encourage them to continue making policy recommendations in accordance with the multilateral consensus under the United Nations Framework Convention on Climate Change and the Paris Agreement, as well as WTO rules. China is willing to play an active and constructive role and contribute its wisdom and strength in building a global climate governance framework that is fair, reasonable, an d mutually beneficial.
In addition, our authorities have been fully complying with our obligations and commitments with regard to data provision and disclosure. Nevertheless, we will continue to make efforts to expand data collection, improve data quality, and enhance data transparency to better support policymaking.
Lastly, I would like to once again thank Ms. Gita Gopinath for her leadership, as well as Mr. Krishna Srinivasan, Mr. Thomas Helbling, Ms. Sonali Jain-Chandra, and the entire China team for their arduous and professional work.