China's central bank and the municipal government of Suzhou help JD.com test the digital currency for online shopping in December 2020. Photo: Courtesy of JD.com

China does not have any structural shortcomings that will trigger a subprime mortgage crisis like the one occurred in the US in 2007, as the country's the housing demand of urban and rural residents continue to increase amid regulatory measures to prevent and address the risks of the real estate market, former chief of the People's Bank of China (PBC) said on Sunday.

Dai Xianglong, former governor of the PBC, the central bank, made the remarks during a financial summit held by iFeng news in Shanghai when talking about China's modern financial development over the next five to 10 years.

Dai said that the central bank has announced to reduce the reserve requirement ratio of commercial banks aimed at increasing market liquidity, after the Political Bureau of the Communist Party of China Central Committee held a meeting on December 6, proposing to "promote the construction of subsidized housing and support the commercial housing market to better meet the needs of homebuyers".

The decision will effectively control and reduce the risks of the property industry and promote the sound development and positive operation of the sector, Dai said.

As of October 8, China had opened 123 million digital yuan wallets with a total of transaction value of 56 billion RMB. 

Dai said that the internationalization of the yuan is a long process, and authorities should strengthen efforts to facilitate its convertibility, improve overseas settlement and develop offshore markets, in order to increase the recognition of Chinese currency across the international financial community.

Dai noted that the internationalization of the yuan is not a challenge to the dollar, as the latter is still the major global 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 fast-growing deficit, and the dollar will likely maintain a long-term downward trend. According to Dai, the US government has issued $29 trillion debt, inevitably leading to inflation and driving up global prices. China's macro-financial regulation should prevent serious inflation with the accelerated money circulation.

Dai encouraged authorities to establish a social financing system that effectively matches 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 that China's modern financial construction is a key component in the reform and development of China's financial industry, and the US government cannot obstruct 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 promoting international monetary diversification, further increasing China's voice in international financial affairs and maintaining the stability of the international financial order, Dong added.

Global Times