In the securities industry, the shaky firms were closed down and some important ones received government capital injection and were restructured. Their customers' cash accounts were put into independent custodian arrangements with the major banks, thus removing the possibility of customer asset commingling and misappropriations. The banking reform and the securities industry cleanup have proved to be successful and have laid a solid foundation for the financial sector to withstand economic downturn, in particular the ongoing global financial crisis. For example, despite the steep drop of the stock market since late 2007, no securities firms have gotten into big trouble so far. And the major banks are in a strong position to weather economic slowdown. ICBC, CCB and BOC top the global list of banks' market capitalizations. A more robust financial industry after the reform places China in a better position to withstand the financial crisis. Meanwhile, it should be noted that China's financial system has been helped by the progressive opening-up strategy and its limited exposure to overseas markets. We should bear in mind that despite the notable achievements in banking reform, the major banks have not gone through a full business cycle and still have much to improve. An economic slowdown will be the ultimate stress test for the robustness of the banks' strengths.

Irrespective of China's sound financial sector, the Chinese economy, especially the export sector, has felt the impact brought by the slowdown of the global economy. Since the fourth quarter of 2008, as international economic crisis worsened and exerted greater impacts on China's economy, the Chinese government made rapid responses by decisively adopting a proactive fiscal policy and an adaptively easing monetary policy, and launching a bundle of timely, targeted and temporary policies and measures.

First, ten measures were launched to stimulate domestic demand and promote stable and relatively rapid economic growth. The central government planned to invest an extra 4 trillion RMB over two years, which would mainly go to the agricultural sector, welfare and affordable housing, transportation infrastructure, and energy conservation and emission reduction. Second, ten measures to revitalize the industrial sectors were initiated, aiming to strengthen policy support for enterprises. At present, the revitalization plans cover 10 industries including the light industry, automobiles, steel, textile, equipment manufacturing, shipping, petrochemicals, non-ferrous metals, IT and logistics, with the aim to curb and reverse the trend of declining growth in these industries. Third, bolster financial support for economic developments. Since September 2008, People's Bank of China has lowered the benchmark interest rates five times and reduced the reserve requirement ratios on four occasions, for the purpose of maintaining adequate liquidity for the banking sector and promoting stable growth of monetary and credit supply. In addition, 9 measures to strengthen financial support for economic growth were launched. Fourth, earnest efforts have been made to promote employment, improve people's livelihood, better support and benefits for farmers, and stimulate household consumption demand. Fifth, policy measures were adopted to advance the reform of important areas including VAT tax transformation, reform of taxes and fees imposed on oil products, and medical and healthcare system reforms. Having taken the above-mentioned measures, China expect to maintain stable economic growth by boosting domestic demand and reducing dependence on external demand, thus serving as a stabilizing force in global economy.

In overall, the macroeconomic measures have produced preliminary result and some leading indicators are pointing to recovery of economic growth, indicating that rapid decline in growth has been curbed. Facts speak volume and demonstrate that compared with other major economies, the Chinese government has taken prompt, decisive and effective policy measures, demonstrating its superior system advantage when it comes to making vital policy decisions.

(The People's Bank of China by Zhou Xiaochuan, the governor of the People's Bank of China, China's central bank , March 27, 2009)