Since 2020, the novel coronavirus pneumonia has seriously affected the economic and social development of China. Under the strong leadership of the CPC Central Committee, the whole country has made concerted efforts to coordinate the work of epidemic prevention and control and economic and social development. China's economic growth shows strong resilience. In the first half of 2020, GDP dropped slightly by 1.6% year-on-year, of which the second quarter increased by 3.2%, significantly better than expected; the consumer price index (CPI) rose by 3.8% year-on-year in the first half of 2020, the employment situation was generally stable, and the import and export trade was better than expected.
The people's Bank of China adheres to the guidance of Xi Jinping's new socialist ideology with Chinese characteristics, resolutely implements the decision making and deployment of the Central Committee and the State Council, and prudent monetary policy is more flexible and moderate. In accordance with the phased characteristics of epidemic prevention and control and resumption of production, it has a flexible grasp of the intensity, rhythm and emphasis of regulation, and insists on the moderate policy of total amount, the obvious reduction of financing cost and support for the real economy. In response to the highly uncertain situation, the three certainty of the economy supports the return of economic growth to potential growth, and creates a suitable monetary and financial environment for the work of "six stabilities" and "six guarantees".
One is to maintain reasonable and sufficient liquidity. Flexible use of tools such as RRR reduction, medium-term loan convenience, open market operation, refinancing, rediscount and other tools were used to guide the market interest rate to run smoothly around the policy interest rate and stabilize the market expectation. Second, continue to release reform dividends and reduce the comprehensive financing cost of society. We guided medium-term lending facilities and open market operations to lower the bid winning rate by 30 basis points, driving down the quoted interest rate (LPR) in the loan market. We will steadily promote the conversion of pricing benchmark for existing floating rate loans and reduce the interest expenditure on existing loans. The third is to improve the tool system of structural monetary policy and precise drip irrigation. The 300 billion yuan special refinancing and 500 billion yuan refinancing and rediscount policies have been basically implemented, and the 1 trillion yuan refinancing and rediscount policies have been orderly linked up.
We will innovate two policy tools that can go directly to the real economy, increase support for inclusive small and micro enterprises, and support economic recovery and development. Fourth, we should give priority to ourselves and give consideration to external balance. The RMB exchange rate is generally stable and the two-way floating flexibility is enhanced. Fifthly, we should firmly hold the bottom line of no systemic financial risks, implement the principles of marketization and legalization, steadily promote the disposal of financial risks, and intensify the disposal of non-performing loans after verification.
On the whole, the steady monetary policy has achieved remarkable results, the transmission efficiency has been further improved, reflecting the foresight, accuracy, initiative and effectiveness, and the financial support for the real economy has been significantly enhanced. At the end of June, the broad money supply (M2) increased by 11.1% year-on-year, and the scale and stock of social financing increased by 12.8% year-on-year, both of which were significantly higher than those in 2019. The weighted average interest rate of corporate loans in June was 4.64%, down 0.48 percentage points from December of last year. Monetary and credit structure was further optimized. At the end of June, inclusive small and micro loans increased by 26.5% year-on-year, and medium and long-term loans in manufacturing industry increased by 24.7% year-on-year. The RMB exchange rate fluctuates in both directions and the market is expected to be stable. At the end of June, the RMB exchange rate index of China Foreign Exchange Trading Center (CFETS) was at 92.05, up 0.72% from the end of the previous year.
In the long run, China's economic fundamentals of stable and good, long-term and high-quality development have not changed. However, it should also be noted that the world economy is in recession with great instability and uncertainty.
