Chinese Central Bank Unveils its Economy Stimulus Plan- A Full Transcript

A Transcript and Key Points of the Press Conference

Alarm! Very Long piece warning!

This morning, the People’s Bank of China(PBoC), the National Financial Regulation Administration(NFRA), and the China Securities Regulatory Commission(CSRC) held a joint press conference.

In short,

1. Lowers the reserve requirement ratio by 0.5 percent, providing about 1 trillion yuan of long-term liquidity to the financial market. Depending on market liquidity conditions, there may be a further reduction of 0.25-0.5 percentage points in the reserve requirement ratio within this year. The central bank's policy interest rate, namely the 7-day reverse repo rate, will be reduced by 0.2 percentage points from the current 1.7% to 1.5%.

2. The rate could be further lowered by 0.25-0.5 percentage points later this year, depending on the liquidity situation.

3. Reducing existing mortgage rates and unifying the minimum down payment ratio for home loans. It will be an average reduction of 0.5 percentage points. The minimum down payment ratios for first and second homes will be unified, with the national-level minimum down payment for second homes reduced from the current 25% to 15%. It also vows to support the re-lending program for affordable housing by increasing the central bank's funding support ratio increased from 60% to 100%.

4. Policies regarding commercial property loans and the "16 Financial Measures" that were set to expire at the end of this year will be extended to the end of 2026.

5. When asked, PBoC Governor Pan Gongsheng stated that they are actively researching the implementation of a Stock Market Stabilization Fund.

Here I attach the transcript of the press conference translated myself

Source:国新办举行新闻发布会 介绍金融支持经济高质量发展有关情况

PBoC Governor Pan Gongsheng:

Since the beginning of this year, the People's Bank of China has adhered to the fundamental purpose of financial services serving the real economy, maintained a supportive monetary policy stance and policy orientation, and implemented three significant monetary policy adjustments in February, May, and July.

In terms of the overall monetary policy, we have comprehensively utilized various monetary policy tools such as reducing the reserve requirement ratio, lowering policy interest rates, and guiding the loan prime rate downward to create a favorable monetary and financial environment.

Structurally, the monetary policy has focused on key aspects of high-quality development, establishing re-lending programs for technological innovation and technical transformation, and increasing financial support for technological innovation and equipment upgrades. We have reduced mortgage down payment ratios and interest rates, lowered housing provident fund loan rates, and set up re-lending for affordable housing to accelerate the destocking of existing commercial housing through market-oriented methods.

In terms of monetary policy transmission, we have promoted reforms in calculating the quarterly value-added of the financial industry, changing from the previous estimation method based mainly on loan and deposit growth to an income-based accounting method. We have also rectified and standardized manual interest subsidies and fund circulation, revitalized existing inefficient financial resources, improved the effectiveness of fund utilization, and enhanced the efficiency of monetary policy transmission.

Regarding the exchange rate, we have adhered to the decisive role of the market in exchange rate formation, maintained exchange rate flexibility, strengthened expectation guidance, and kept the RMB exchange rate basically stable at a reasonable and balanced level.

The effects of monetary policy are becoming increasingly evident. By the end of August, the year-on-year growth of total social financing was 8.1%, and RMB loans increased by 8.5% year-on-year, about 4 percentage points higher than nominal GDP growth. Financing costs are also at historical lows.

According to the central government's decisions and arrangements, to further support stable economic growth, the People's Bank of China will firmly maintain a supportive monetary policy stance, increase the intensity of monetary policy regulation, enhance the precision of monetary policy control, and create a favorable monetary and financial environment for stable economic growth and high-quality development.

Taking advantage of today's press conference, I am announcing the following policies:

First, we will reduce the reserve requirement ratio and policy interest rates, which will lead to a decrease in market benchmark interest rates. Second, we will lower interest rates on existing mortgages and unify the minimum down payment ratio for home loans. Third, we will create new monetary policy tools to support the stable development of the stock market.

1. Reducing the reserve requirement ratio and policy interest rates:
   In the near term, we will lower the reserve requirement ratio by 0.5 percentage points, providing about 1 trillion yuan of long-term liquidity to the financial market. Depending on market liquidity conditions, we may further reduce the reserve requirement ratio by 0.25-0.5 percentage points within this year. We will lower the central bank's policy interest rate, specifically reducing the 7-day reverse repo rate by 0.2 percentage points, from the current 1.7% to 1.5%. This will also guide the loan prime rate and deposit rates to decrease accordingly, maintaining the stability of commercial banks' net interest margins.

2. Lowering existing mortgage rates and unifying the minimum down payment ratio for home loans:
   We will guide commercial banks to reduce existing mortgage rates to levels close to those of newly issued loans, with an expected average reduction of about 0.5 percentage points. We will unify the minimum down payment ratios for first and second homes, lowering the national-level minimum down payment for second homes from the current 25% to 15%. The 300 billion yuan re-lending program for affordable housing, created by the People's Bank of China in May, will see the central bank's funding support ratio increased from 60% to 100%, enhancing market-based incentives for banks and acquisition entities. The policies regarding commercial property loans and the "16 Financial Measures" that were set to expire at the end of this year will be extended to the end of 2026.

3. Creating new monetary policy tools to support the stable development of the stock market:
   First, we will create a swap facility for securities firms, fund companies, and insurance companies. This will support qualified institutions in obtaining liquidity from the central bank through asset pledges, significantly enhancing their ability to acquire funds and increase stock holdings. Second, we will establish special re-lending for stock buybacks and increased holdings, guiding banks to provide loans to listed companies and major shareholders to support stock buybacks and increased holdings.

The above policy measures will be announced in detail through policy documents or announcements on the People's Bank of China website in the near future.

NFRA Chief Li Yunze:

In terms of risk prevention, we focus on key areas, advancing risk mitigation efforts in a step-by-step manner, striving to create a safe and stable financial environment for economic development. Following the directives of the Central Financial Work Conference, we actively promote the reform and risk mitigation of small and medium-sized financial institutions, resolutely avoiding risk spillovers and transmission. Currently, regions with high-risk institutions have formulated specific reform and risk mitigation plans, implementing them steadily and orderly with a 'one province, one policy' approach. Meanwhile, we guide banking and insurance institutions to actively cooperate in resolving risks in real estate and local government debt. At present, China's financial industry, especially large financial institutions, operates steadily with controllable risks. As the three major risks - real estate, local debt, and small and medium-sized financial institutions - are gradually resolved and mitigated, financial risks are steadily converging. We will firmly uphold the bottom line of preventing systemic financial risks.

Regarding strengthening supervision, we adhere to addressing both symptoms and root causes, using reforms to solve problems and institutions to promote standardization, continuously enhancing the industry's sustainable development capability. We guide the banking and insurance industries to return to their roots, focus on core businesses, achieve differentiated development, and complement each other's strengths. We promote the introduction of new 'Ten National Policies' for the insurance industry, timely improve asset management regulations, continuously strengthen the governance of non-bank institutions, optimize and solidify credit management foundations, and address deep-seated issues constraining the industry's sustained healthy development. We guide financial institutions to optimize their layout, enhance internal capabilities, and actively respond to risks of narrowing net interest margins and interest rate differentials. Focusing on controlling substantial risks, we effectively implement the duty performance and exemption system, while seriously investigating and punishing major illegal and non-compliant behaviors, creating a fair and just market order.

In promoting development, we focus on clearing bottlenecks and obstacles, enhancing economic and financial compatibility, and strengthening financial services in key areas and weak links. We reinforce financing guarantees for 'two priorities' and 'two new' areas, strongly supporting the development of new productive forces tailored to local conditions. As of the end of August this year, loans to high-tech industries and medium and long-term loans to the manufacturing sector increased by 13.2% and 15.9% year-on-year, respectively. We promote the expansion of small and micro enterprise loans, increasing support for private enterprises without discrimination. Inclusive small and micro enterprise loans and private enterprise loans increased by 16.1% and 9.1% year-on-year, respectively. We guide insurance institutions to provide full claims services for major accidents and natural disasters such as heavy rain and typhoons, helping affected people and businesses overcome difficulties. In the first eight months of this year, the insurance industry has paid out a cumulative 1.55 trillion yuan in claims, an increase of 26.1% year-on-year.

Going forward, the Financial Regulatory Administration will actively strengthen communication and exchanges with the market and media friends, promptly responding to social concerns. Governor Pan has just briefed you on relevant policy adjustments. Regarding the optimization and improvement of regulatory policies, I will have specific exchanges with you during the Q&A session. We will strive to create a stable, transparent, and predictable regulatory policy environment, continuously exerting effort and providing more support, constantly improving the quality and effectiveness of services to the real economy, contributing more financial strength to high-quality development. Thank you.

CSRC Chief Wu Qing:

In April this year, the State Council issued the new "Nine Measures". We have earnestly implemented these measures, working with relevant parties to formulate several supporting documents and revise over 50 institutional rules. Together with the new "Nine Measures", these form a "1+N" policy rule system. A series of key measures are being implemented, and we have achieved some initial results in strengthening supervision, preventing risks, and promoting high-quality development in the capital market.

1. The market ecology has further improved. We have maintained strict regulation with "teeth and thorns". The State Council Office forwarded the opinions of the CSRC and four other ministries on further improving comprehensive prevention and punishment of financial fraud in the capital market. By the end of August, 577 securities and futures violation cases had been investigated, including serious cases like Evergrande Real Estate and CNMC Titanium. We also strictly dealt with PwC, Evergrande's auditor, in collaboration with the Ministry of Finance, creating a strong deterrent.

2. Basic market systems have been rapidly improved. We've optimized rules for IPOs, dividends, share reductions, and trading. Listed companies' dividends reached 2.2 trillion yuan in 2023, a historic high. We've strengthened algorithmic trading supervision, tightened rules, and suspended securities lending. We've also deepened public fund fee reform, encouraging industry institutions to prioritize functional construction.

3. Market functions remain generally effective. Despite many difficulties, we've maintained an appropriate pace for IPOs and refinancing. We've continuously improved the efficiency of overseas listing registration management and steadily leveraged bond and futures market functions. In the first eight months, various bonds worth 8.9 trillion yuan were issued in the exchange bond market, maintaining steady growth.

4. Capital market reform and innovation are steadily advancing. Focusing on the "five major articles" of finance, we've implemented a series of policy measures including "16 measures" for serving tech companies and "8 measures" for the Sci-Tech Innovation Board. We've also supported venture capital development. Since May this year, nearly 50 major restructuring cases have been disclosed across the market, receiving positive market response.

The Third Plenary Session of the 20th CPC Central Committee made strategic deployments for further comprehensive deepening of capital market reform. The CSRC will adhere to strengthening fundamentals and strict supervision, promoting development and maintaining stability through reform. We aim to continuously improve the capital market's functions in coordinating investment and financing, better serving Chinese-style modernization. We will focus on "three prominences":

1. Prominently enhance the internal stability of the capital market. We'll establish a clear orientation towards rewarding investors and improve the quality and investment value of listed companies. We'll accelerate investment-side reform and promote a policy system for "long money and long-term investment". We'll issue guidelines on promoting medium and long-term funds entering the market and further improve our policy toolbox to safeguard against risks.

2. Prominently serve the recovery and high-quality development of the real economy. Focusing on key areas like new productive forces, we'll utilize various capital market tools including stocks, bonds, and futures. We'll take multiple measures to invigorate the M&A market and issue six measures to promote M&A and restructuring. We'll also work to smooth the "fundraising-investment-management-exit" cycle for private equity and venture capital funds.

3. Prominently protect the legitimate rights and interests of small and medium investors. We'll resolutely crack down on financial fraud, market manipulation, and other illegal activities. Meanwhile, we'll strive to implement more demonstrative cases in areas such as representative litigation and advance compensation.

Q&A part:

CMG Reporter Asked: The People's Bank of China has made three major monetary policy adjustments this year. Governor Pan just mentioned plans to further reduce the reserve requirement ratio and policy rates. These policies will play a crucial role in stabilizing growth, drawing much attention. Could you explain this in more detail?

Answer from Pan:

Regarding monetary policy volume, this is a topic of great interest to society and the market. I've repeatedly stated that the People's Bank of China maintains a supportive monetary policy stance, increasing the intensity and precision of monetary policy regulation. We've used a combination of monetary policy tools to support stable growth in the real economy.

In designing monetary policy tool adjustments, we consider several important factors:

1. Supporting stable economic growth in China

2. Promoting a moderate rise in prices

3. Balancing support for real economy growth with the health of the banking sector

4. Maintaining basic stability of the RMB exchange rate at a reasonable equilibrium level

We also focus on coordinating monetary policy with fiscal policy to support the effectiveness of active fiscal policies.

Now, let me detail some specific macroeconomic and monetary policy adjustments:

1. Regarding the reduction of the reserve requirement ratio (RRR):

   • In February, we lowered the RRR by 0.5 percentage points.

   • We plan to reduce it by another 0.5 percentage points, injecting about 1 trillion yuan of long-term liquidity into the financial market.

   • The weighted average RRR for financial institutions is currently 7%.

   • After this adjustment, the average RRR for the banking sector will be about 6.6%.

   • We may further reduce the RRR by 0.25-0.5 percentage points before the end of the year.

2. Regarding the reduction of policy interest rates:

   • We're lowering the 7-day reverse repo rate from 1.7% to 1.5%.

   • This is expected to lead to a reduction in the Medium-term Lending Facility (MLF) rate by about 0.3 percentage points.

   • The Loan Prime Rate (LPR) and deposit rates are expected to decrease by 0.2 to 0.25 percentage points.

The overall impact of these rate adjustments on banks' net interest margins is expected to be neutral. While lowering existing mortgage rates will reduce banks' interest income, it will also reduce early repayments. The RRR cut provides banks with low-cost, long-term operational funds. The lowering of MLF and open market operation rates will reduce banks' funding costs. Additionally, deposit rates are expected to decrease symmetrically with lending rates.

Our technical team has conducted multiple rounds of quantitative analysis, concluding that this rate adjustment will have a neutral effect on bank earnings, with net interest margins remaining basically stable.

China Securities Journal Reporter:The Third Plenum proposed improving capital market functions to balance investment and financing, supporting long-term fund entry. How can we better encourage medium and long-term funds to enter the market and balance investment and financing going forward?

CSRC Chief:

Long-term money is indeed very important. Medium and long-term funds operate with a high degree of professionalism and stability, playing a crucial role in overcoming short-term market fluctuations and serving as a 'stabilizer' and 'ballast' for the capital market. In recent years, the CSRC has vigorously promoted the development of equity public funds and, together with relevant parties, continuously pushed for the entry of medium and long-term funds into the market, achieving some phased results. By the end of August this year, professional institutional investors, including equity public funds, insurance funds, and various pension funds, held a total A-share circulating market value of nearly 15 trillion yuan, more than doubling since early 2019, with their proportion of A-share circulating market value rising from 17% to 22.2%. Among these, the National Social Security Fund stands out particularly. Since its establishment, the National Social Security Fund has achieved an average annualized return of over 10% in domestic stock market investments, becoming a model of long-term and value investment in the A-share market.

At the same time, we also see that problems such as insufficient total medium and long-term funds in the capital market, suboptimal structure, and inadequate leading role are still prominent, and the institutional environment for 'long money, long investment' has not yet fully formed. To implement the spirit of the Third Plenary Session of the 20th CPC Central Committee and further address the pain points and bottlenecks of medium and long-term funds entering the market, the CSRC and other relevant departments have recently formulated the 'Guiding Opinions on Promoting Medium and Long-term Funds to Enter the Market' with strong support from relevant ministries and commissions, which will be issued soon. It includes a series of arrangements to support the entry of medium and long-term funds into the market, and we believe the institutional environment will continue to improve. The overall aim is to focus on the goal of 'more long money, longer-term money, better returns' to further promote the entry of medium and long-term funds into the market. The soon-to-be-released 'Guiding Opinions' proposes three key measures:

First, vigorously develop equity public funds. The focus is on urging fund companies to further correct their business philosophy, adhere to investor return orientation, strive to enhance investment research and service capabilities, create more products that meet the needs of the public, and work hard to create long-term returns for investors. Recently, you may have noticed that 10 new CSI A500 ETFs were issued, which were very well received by the market and quickly reached the fundraising limit. Next, we will further optimize the registration of equity fund products, vigorously promote innovation in index products such as broad-based ETFs, and launch more small and medium-cap ETF fund products including ChiNext and STAR Market in due course, to better serve investors and better serve national strategies and the development of new quality productive forces. In addition, we will promote the steady reduction of comprehensive fee rates in the public fund industry, which has been a much-discussed issue recently. Two steps have already been taken, with one more step to follow. By steadily reducing comprehensive fee rates, we aim to better benefit and reward investors.

Second, improve the institutional environment for 'long money, long investment'. The focus is on increasing regulatory tolerance for equity investment by medium and long-term funds and fully implementing long-cycle assessments of over 3 years. We will remove institutional barriers affecting long-term investment by insurance funds, encourage insurance institutions to be firm value investors, and provide stable long-term investment for the capital market. At the same time, we will guide positive interaction between multi-level, multi-pillar pension security systems and the capital market, improve investment policy systems for the National Social Security Fund and basic pension insurance funds, and encourage enterprise annuity funds to explore different types of differentiated investments based on holders' different ages and risk preferences.

Third, continuously improve the capital market ecosystem. The focus is on taking multiple measures to improve the quality and investment value of listed companies, perfecting supporting institutional arrangements such as institutional investor participation in corporate governance, while strictly cracking down on various illegal and non-compliant behaviors, shaping a good market ecology where medium and long-term funds are 'willing to come, able to stay, and able to develop well'.

Next, we will work together with relevant ministries, commissions, and units to increase efforts in advancing work and ensure that various measures can be implemented and put into practice.

21st Century Business Herald reporter:

Large commercial banks play a crucial role in the financial system. What measures will financial regulatory departments take in the near future to promote the stable operation of large banks? In June this year, the State Council issued 'Several Policy Measures to Promote High-Quality Development of Venture Capital Investment', which proposed expanding the scope of equity investment pilot programs for financial asset investment companies under large banks. What implementation measures have been taken in this regard?

NFRA Chief Li Yunze：Large commercial banks are the main force in serving the real economy within China's financial system and also serve as the ballast for maintaining financial stability. Currently, large commercial banks are operating and developing steadily, with stable asset quality, and their main regulatory indicators are all within the 'healthy range'. As we know, capital is the 'foundation' of financial institutions' operations, the basis for enhancing their ability to serve the real economy, and a barrier against risks. In recent years, large commercial banks have mainly relied on retaining their own profits to increase capital. However, as banks continue to increase their efforts in reducing fees and benefiting customers, net interest margins have narrowed and profit growth has gradually slowed, requiring a comprehensive approach using multiple channels, both internal and external, to replenish capital. To consolidate and enhance the ability of large commercial banks to operate and develop steadily, and to better play their role as the main force in serving the real economy, after research, the state plans to increase the core tier-1 capital of six large commercial banks. This will be implemented in an orderly manner following the principle of 'coordinated promotion, phased implementation, and tailored approaches for each bank'. We will also continue to urge large commercial banks to improve their refined management level and strengthen their capacity for high-quality development under capital constraints.

Currently, indirect financing still dominates China's total social financing, which means we need to forge a path for the development of science and technology finance, especially science and technology investment, with Chinese characteristics. Previously, financial asset investment companies under large commercial banks have carried out equity investment pilots in Shanghai, exploring paths, accumulating experience, and training teams, and are now ready for pilot expansion. According to the relevant deployment of the State Council, to effectively play the leading role of the pilot program and encourage the development of venture capital, we plan to take the following three measures to promote it:

1. Expand the range of pilot cities. We will work with relevant departments to study expanding the pilot range from the original Shanghai to 18 large and medium-sized cities active in technological innovation, including Beijing.

2. Relax restrictions. Appropriately relax restrictions on equity investment amounts and proportions, increasing the proportion of on-balance-sheet investments from the original 4% to 10%, and the proportion of investment in a single private equity fund from the original 20% to 30%.

3. Optimize assessment. Guide relevant institutions to implement the requirements of duty performance exemption, and establish and improve long-cycle, differentiated performance assessments.

Reuters: Despite the Chinese government introducing many policies to attract home buyers and reduce the loan burden on homeowners, China's housing prices continue to fall, with some cities experiencing double-digit drops in total housing prices. I would like to ask, do China's financial regulatory authorities believe that the time has come for monetary policy measures to be introduced?

Pan's Answer:

Our main focus is based on our own responsibilities, supporting the risk resolution and healthy development of the real estate market from a financial perspective. In recent years, the People's Bank of China has continuously improved its macroprudential policy for real estate finance, implementing comprehensive measures from both supply and demand sides. We have repeatedly lowered the minimum down payment ratio for personal housing loans, reduced loan interest rates, removed the lower limit of interest rate policies, and established a series of policies such as re-lending support for affordable housing to acquire existing commercial housing. To implement the central government's decision to promote the stable and healthy development of the real estate market, the People's Bank of China, together with the Financial Regulatory Commission, has introduced five new real estate financial policies.

The first policy is to guide banks to lower interest rates on existing housing loans. In August last year, the People's Bank of China promoted the orderly reduction of interest rates on existing housing loans by commercial banks, which had quite good results. After the policy lower limit for national housing loan interest rates was lifted on May 17 this year, we canceled this lower limit in the new housing loan policy. The interest rate for newly issued loans has been reduced further based on the market quote rate, significantly lowering the interest rate level and once again widening the interest rate gap between new and old housing loans. Especially in big cities like Beijing, Shanghai, Shenzhen, and Guangzhou, where the original markup was relatively high, the interest rate gap between newly issued mortgage loans and existing mortgage loans became even larger after that adjustment. In response, the People's Bank of China plans to guide banks to make batch adjustments to existing housing loan interest rates, lowering them to near the interest rates of newly issued loans. We expect an average decrease of about 0.5 percentage points. We say 'average' because loans were issued at different times, and existing housing loan interest rates vary across different periods, regions, and banks. Our predicted decrease is an expected average. Banks lowering interest rates on existing housing loans will help further reduce borrowers' mortgage interest expenses. We expect this policy will benefit 50 million households, or 150 million people, reducing total household interest expenses by about 150 billion yuan annually. This will help promote consumption and investment expansion, reduce early loan repayments, and limit the space for illegal replacement of existing housing loans, protecting the legitimate rights and interests of financial consumers and maintaining the stable and healthy development of the real estate market.

We will officially release this document soon. Because it involves many borrowers, banks also need some time for necessary technical preparations. It's unlikely that banks can handle this immediately, so people shouldn't rush to the banks this afternoon. Next, we are also considering guiding commercial banks to improve the pricing mechanism for mortgage loans, allowing banks and customers to negotiate dynamic adjustments based on market principles.

The second policy is to unify the minimum down payment ratio for housing loans to 15%. To better support the rigid and diverse housing improvement needs of urban and rural residents, commercial personal housing loans at the national level will no longer distinguish between first and second homes, with a unified minimum down payment ratio of 15%. After May 17, it was already 15% for first homes, while it was 25% for second homes. This time, we're unifying it to 15% for both first and second homes. I want to clarify two points: local areas can implement policies based on their specific situations, independently determining whether to adopt differentiated arrangements and setting the lower limit of the minimum down payment ratio in their jurisdictions. Because China is so vast, the real estate market situations vary greatly between different cities and regions, local governments can adopt differentiated arrangements and set the lower limit of the minimum down payment ratio in their jurisdictions based on the national baseline. Additionally, commercial banks can negotiate specific down payment ratio levels with customers based on the customer's risk status and willingness. Because 15% is only the minimum down payment ratio, commercial banks may set it higher based on their assessment of customer risk, and some customers might say they have money and can pay a 30% down payment - this is a market-based negotiation between commercial banks and individuals.

The third policy is to extend the duration of two real estate financial policy documents. Previously, the People's Bank of China and the Financial Regulatory Commission introduced the "16 Financial Measures" and commercial property loan policies, which played a positive role in promoting the stable and healthy development of the real estate market and resolving market risks. Among these, temporary policies such as the extension of existing financing for real estate enterprises and commercial property loans were originally set to expire on December 31, 2024, according to the documents. We have now decided, together with the Financial Regulatory Commission, to extend these two policies from December 31, 2024, to December 31, 2026.

The fourth policy is to optimize the re-lending policy for affordable housing. On May 17, the People's Bank of China announced the establishment of a 300 billion yuan re-lending facility for affordable housing, guiding financial institutions to support local state-owned enterprises in acquiring unsold completed commercial housing at reasonable prices for use as for-sale or for-rent affordable housing, based on market and legal principles. This is an important measure to reduce inventory in the real estate market. To further enhance market-based incentives for banks and acquiring entities, we will increase the proportion of People's Bank of China funding in the affordable housing re-lending policy from the original 60% to 100%. Originally, if a commercial bank lent 10 billion yuan, the People's Bank of China provided 6 billion yuan. Now, if a commercial bank lends 10 billion yuan, the People's Bank of China will provide 10 billion yuan in low-cost funds, accelerating the process of reducing commercial housing inventory.

The fifth policy is to support the acquisition of real estate enterprises' existing land. Based on using some local government special bonds for land reserves, we are studying allowing policy banks and commercial banks to provide loans to support qualified enterprises in market-based acquisition of real estate enterprises' land, revitalizing existing land resources and alleviating financial pressure on real estate enterprises. When necessary, the People's Bank of China can also provide re-lending support. We are still studying this policy together with the Financial Regulatory Commission.

Beijing Youth Daily: Regarding small and micro enterprises. We have noticed that recently, the state has introduced many supportive policies for financing small and micro enterprises, and financial institutions have also increased their service efforts. The financing for small and micro enterprises has shown a trend of increasing volume, expanding scope, and stable pricing. However, at the same time, some small and micro enterprises have reported that they still face bottlenecks and obstacles. We would like to know if the Financial Regulatory Commission has any targeted measures in this regard?

NFRA Chief Li Yunze:

In recent years, we have continuously strengthened policy guidance in collaboration with the People's Bank of China and coordinated efforts from multiple parties to improve financing services for small and micro enterprises. As of the end of August this year, the balance of inclusive loans to small and micro enterprises nationwide reached 31.9 trillion yuan, doubling twice compared to the end of 2017, with the average interest rate cumulatively decreasing by 3.5 percentage points. To further address the bottlenecks and obstacles in financing for small and micro enterprises, the Commission will focus on taking measures in two aspects:

First, we will work with the National Development and Reform Commission to establish a coordination mechanism for supporting small and micro enterprise financing. This mechanism draws on the experience of the previous real estate financing coordination mechanism. At the district and county level, we will establish dedicated task forces that will 'hold two hands': one hand reaches out to enterprises, conducting extensive visits to thousands of businesses to deeply understand the operational situations and actual difficulties of small and micro enterprises, especially comprehensively surveying their financing needs; the other hand reaches out to banks, recommending small and micro enterprises that operate legally and compliantly, have genuine financing needs, and good credit status to banking institutions. Banks should promptly engage and, in principle, complete credit approval within one month, ensuring that credit funds directly reach small and micro enterprises, truly bridging the 'last mile' to benefit businesses and the people.

Second, we will optimize the loan renewal policy without repayment of principal. In 2014, the former China Banking Regulatory Commission issued a loan renewal policy for small and micro enterprises, commonly known as 'Document No. 36', which clarified that eligible small and micro enterprises can apply for loan renewal if they still have financing needs when their loans mature. In other words, small and micro enterprises can continue financing without repaying the principal when their loans mature, a practice also known as 'loan renewal without principal repayment'. This policy has been well-received by small and micro enterprises and has played a positive role in promoting their financing. We will further optimize the loan renewal policy in three aspects:

1. Expand the scope of loan renewal from some small and micro enterprises to all small and micro enterprises. Those with genuine financing needs and facing financial difficulties when their loans mature can apply for loan renewal support if they meet the conditions.

2. Temporarily extend the loan renewal policy to medium-sized enterprises for a period tentatively set at three years. That is, working capital loans for medium-sized enterprises maturing before September 30, 2027, can follow the loan renewal policy for small and micro enterprises.

3. Adjust risk classification standards. For loans to enterprises that operate legally and compliantly, maintain continuous operations, and have good credit, the risk classification will not be downgraded solely due to loan renewal.

To ensure that relevant credit support policies for small and micro enterprises are truly implemented, especially to address the concerns of grassroots credit personnel in carrying out credit business for these enterprises, the Commission recently issued a duty performance and liability exemption system for inclusive credit. This system details the relevant circumstances for duty performance and liability exemption to fully mobilize the enthusiasm and initiative of grassroots staff, striving to form a long-term mechanism where they dare to lend, are willing to lend, are able to lend, and know how to lend.

Yicai (First Financial) reporter:

At the beginning of this year, we saw the establishment of a new urban real estate financing coordination mechanism. Could you tell us about the latest progress and effectiveness of this mechanism? What are the next steps and new initiatives being considered?

The stable and healthy development of the real estate market is crucial to the overall economic and financial situation and directly affects the interests of the people. In recent years, China's real estate market has undergone significant changes in supply and demand relationships. Continuous slowdown in sales has led to tight liquidity for real estate companies, and some pre-sold projects under construction have struggled to be delivered on time. To address this issue, the Commission, together with the Ministry of Housing and Urban-Rural Development, established an urban real estate financing coordination mechanism.

The key feature of this mechanism is its 'city-centric, project-focused' approach. It separates the risks of real estate group companies from the construction of real estate projects, fully leveraging the coordinating role of local governments. Compliant projects under construction that have been pre-sold are included in a project 'whitelist', guiding financial institutions to meet the reasonable financing needs of these projects, promoting their completion and delivery, and effectively protecting the legitimate rights and interests of homebuyers.

With the joint efforts of all parties, the urban coordination mechanism has achieved good results. To date, commercial banks have approved over 5,700 'whitelist' projects, with approved financing amounts reaching 1.43 trillion yuan, supporting the timely delivery of more than 4 million housing units. Driven by this coordination mechanism, financial institutions have continually expanded their support for the real estate industry. As of the end of August, our real estate development loans this year achieved positive growth compared to the beginning of the year, reversing the downward trend. Real estate merger and acquisition loans and housing rental loans have increased by 14% and 18% respectively, providing strong financial support for promoting the stable and healthy development of the real estate market.

At the same time, to actively support rigid and improved housing demands, as Governor Pan just mentioned, we have worked with the People's Bank of China to guide local authorities and financial institutions in adjusting relevant real estate financial policies based on local conditions. In the next step, we will also cooperate with the People's Bank of China to actively and prudently promote the reduction of interest rates on existing mortgages, further reducing residents' mortgage expenses and improving people's sense of gain.

Red Star News

Currently, the market is very concerned about mergers and acquisitions (M&A) and restructuring of listed companies. You just mentioned that multiple measures will be taken to activate the M&A market. Regulatory authorities have been promoting market-oriented reforms in M&A and restructuring in recent years. Could you please tell us what specific measures the China Securities Regulatory Commission (CSRC) will take next to better stimulate the efficiency and vitality of capital market M&A and restructuring?

CSRC Chief Wu Qing：The new 'Nine National Measures' have made important arrangements for activating the M&A and restructuring market. To further stimulate the vitality of this market, the CSRC, based on extensive research and listening to opinions from various parties, has developed the 'Six Measures for M&A' mentioned earlier, officially known as 'Opinions on Deepening Market Reform of Listed Companies' Mergers and Acquisitions'. These measures adhere to a market-oriented direction and aim to better leverage the capital market's primary role in M&A and restructuring. The main contents of the opinions include:

1. Strongly supporting the transformation and upgrading of listed companies towards new productive forces. The CSRC will actively support listed companies in carrying out M&A around strategic emerging industries and future industries. This includes cross-industry M&A based on transformation and upgrading goals, as well as acquisitions of unprofitable assets that help strengthen supply chains and enhance key core technological levels, guiding more resource elements towards new productive forces.

2. Actively encouraging listed companies to strengthen industrial integration. China is the only country in the world with all industrial categories, but we also see that some industries are large but not strong, numerous but not excellent. While supporting the development of new industries, the capital market will continue to help traditional industries reasonably increase industrial concentration and improve resource allocation efficiency through restructuring. We will support integration needs between listed companies by significantly simplifying the review process. Meanwhile, we will encourage private equity funds to actively participate in M&A through arrangements such as 'reverse linkage' of lock-up periods.

3. Further increasing regulatory tolerance. This has been an issue of constant market concern. While further adhering to rules, the CSRC will respect market, economic, and innovation laws. We will increase tolerance for issues such as restructuring valuation, performance commitments, industry competition, and related-party transactions based on actual situations, better playing the role of market optimization in resource allocation.

4. Making great efforts to improve transaction efficiency in the restructuring market. Currently, payment tools available for restructuring are quite diverse, including cash, shares, and convertible bonds. Going forward, the CSRC will support listed companies in using phased issuance of shares and convertible bonds as payment tools, phased payment of transaction considerations, and phased supporting financing according to specific transaction needs, further improving transaction flexibility and capital use efficiency. At the same time, we will establish a simplified review procedure for restructuring, significantly simplifying the review process, shortening the review time, and improving restructuring efficiency for eligible listed companies.

Moreover, activating the M&A and restructuring market relies on the functional role of intermediary institutions. The CSRC will guide securities companies and other intermediaries to further improve their service levels, fully leveraging their functions in transaction matching and professional services to help listed companies implement high-quality M&A and restructuring. The CSRC will also properly carry out regulatory work according to law, cracking down on various illegal and non-compliant behaviors, effectively maintaining order in the restructuring market, conducting restructuring in an orderly manner, and effectively protecting the legitimate rights and interests of small and medium investors.

MNI-Market News

The Federal Reserve has cut interest rates by 50 basis points this month. Does this provide room for further monetary policy easing in China? How does the People's Bank of China assess the impact of the Federal Reserve's rate cut on China's foreign exchange market

PBoC head Pan Gongsheng:

Recently, major economies have adjusted their monetary policies, and as we've seen, the depreciation pressure on the RMB has significantly eased, even turning towards appreciation. On September 18, the Federal Reserve cut interest rates by 50 basis points, marking the first rate cut after years of being in a rate hike cycle. Meanwhile, other international central banks have also moved towards rate cuts. The European Central Bank has cut rates twice since June, totaling 50 basis points, the Bank of England cut rates by 25 basis points in August, and central banks in Canada, Sweden, and others have also shifted towards rate cuts. Except for the Bank of Japan, major economies have entered a rate cut cycle, weakening the momentum of dollar appreciation. The dollar index has overall declined, falling 3% since August, now hovering around 101. As the monetary policy cycle gap between China and other countries narrows, the external pressure on RMB exchange rate stability has significantly reduced. On September 23, the RMB/USD exchange rate was around 7.05, appreciating by 2.4% since August.

The exchange rate is a price relationship between currencies, influenced by multiple factors such as economic growth, monetary policy, financial markets, geopolitics, and unexpected risk events.

Looking at external factors, uncertainties in the external environment and dollar trends persist due to diverging economic trajectories among countries, geopolitical changes like the U.S. election, and international financial market fluctuations.

From China's domestic perspective, we believe the RMB exchange rate has a solid foundation for stability:

Firstly, from a macro level, the trend of economic stabilization and improvement will further consolidate and strengthen. The People's Bank of China's recent strong monetary policy will help support the real economy, promote consumer spending, and boost market confidence.

Secondly, the international balance of payments remains generally stable. The current account surplus to GDP ratio was 1.1% in the first half of the year, which can be considered within a reasonable range.

Thirdly, the People's Bank of China and the State Administration of Foreign Exchange place great importance on foreign exchange market development. Market participants are more mature, trading behaviors are more rational, and market resilience has significantly increased. In the first half of this year, the hedging ratio of import and export enterprises reached 27%, and the proportion of cross-border RMB settlements in goods trade accounted for 30%. These two figures are non-overlapping, and if combined, it means that about 50% of enterprises in foreign trade exports are less affected by exchange rate risks. As the People's Bank of China has repeatedly explained to the market, under the context of two-way RMB exchange rate fluctuations, participants should view exchange rate fluctuations rationally, enhance risk-neutral concepts, avoid "betting on exchange rate direction" or "betting on unilateral trends". Enterprises should focus on their main business, and financial institutions should persist in serving the real economy well.

The People's Bank of China's stance on exchange rate policy is clear and transparent. There are several key points: First, we adhere to the decisive role of the market in exchange rate formation, maintaining exchange rate flexibility. Second, we need to strengthen expectation guidance, prevent the foreign exchange market from forming unilateral consistent expectations and self-fulfillment, guard against the risk of exchange rate overshooting, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

CNBC:

Analysts believe that the decline in Chinese government bond yields is partly due to market expectations of slowing economic growth and monetary policy easing. How will the central bank react to this? What corresponding measures might it take?

Pan Gongsheng:

The discussion on this topic has calmed down a bit recently, though it was quite heated earlier. The People's Bank of China (PBOC) has communicated with the market several times in appropriate ways. The earlier decline in Chinese government bond yields was due to several factors: the PBOC guiding market rates down through policy rates, slower government bond issuance supply, and some small and medium-sized financial institutions' lack of risk awareness, which fueled a herd effect.

Currently, China's long-term government bond yields are hovering around 2.1%. This level is a result of market forces, which the PBOC respects. Undoubtedly, it has created a favorable monetary environment for China to implement an active fiscal policy.

However, we must recognize that interest rate risk is a crucial aspect of financial institutions' risk management. The Silicon Valley Bank case in the U.S. is very significant. It reminds us that central banks need to observe and assess market risks from a macroprudential management perspective and take appropriate measures to weaken and prevent risk accumulation. This is an important responsibility of central banks.

Currently, the government bond yield curve, as an important price signal, still has issues such as insufficient long-term pricing and stability. The central bank's risk warnings about long-term government bond yields and strengthened communication with the market aim to curb potential systemic risks that could arise from a unilateral decline in long-term government bond yields due to herd behavior.

Maintaining good trading order in the bond market is also the central bank's responsibility. Recently, the PBOC has discovered instances of price manipulation, account lending, and interest transfer in the bond market. We will increase the investigation and punishment of illegal activities in the interbank bond market and announce them to the public when appropriate. The National Association of Financial Market Institutional Investors has already publicly disclosed several cases, and investigations are ongoing. Once completed, we will announce the results to the public.

In recent years, with the rapid development of China's financial market, the scale and depth of the bond market have gradually increased. Conditions have matured for the central bank to buy and sell government bonds in the secondary market to inject base money. I mentioned our work plans on this issue at the Lujiazui Forum on June 19. Currently, the PBOC has included government bond trading in its monetary policy toolkit and has begun trial operations. Our operations are transparent and publicly available on the PBOC website. We are also working with the Ministry of Finance to study and optimize government bond issuance pace, term structure, and custody systems. The PBOC's process of conducting government bond trading in the secondary market will be gradual.

Phoenix TV

We've noticed that this year's new 'Nine National Measures' have put forward clear requirements for listed companies to enhance their investment value and strengthen market value management. How will the China Securities Regulatory Commission (CSRC) promote related work in the next steps?

CSRC Chif Wu Qing:

Listed companies are the foundation of the market. The capital market can only thrive when listed companies create value for investors and continuously provide returns. The China Securities Regulatory Commission (CSRC) actively supports listed companies in improving operational efficiency and profitability. The State-owned Assets Supervision and Administration Commission (SASAC) is also intensifying its assessment of market value management for state-owned enterprises using a 'one company, one policy' approach. Listed companies must strive to improve the transparency of information disclosure and corporate governance standards, strengthen communication with investors, and use various methods including dividends and share buybacks to reward investors. Since the beginning of this year, over 95% of listed companies have held performance briefings, 663 companies have announced interim dividends totaling 533.7 billion yuan, and more than 1,500 companies have implemented share buybacks exceeding 100 billion yuan in total.

To improve the quality of listed companies and enhance investment value, listed companies must take on real responsibility. Currently, we have worked with relevant ministries to develop guidelines for market value management of listed companies, requiring them to manage market value in accordance with the law. First, the board of directors must prioritize investor protection and returns, laying a solid foundation for market value management by improving operational management, profitability, and core competitiveness. Second, listed companies are required to actively use market value management tools such as mergers and acquisitions, equity incentives, and major shareholder increases to enhance investment value. Third, listed companies are required to establish regular buyback mechanisms, encouraging those with the means to plan and reserve funds in advance. Fourth, long-term undervalued companies are required to formulate value enhancement plans, evaluate implementation effects, and disclose them publicly to create market constraints. Fifth, major index constituent companies are required to take responsibility by establishing market value management systems, clarifying responsibilities and response measures, and regularly disclosing implementation status. It should be emphasized that while strengthening market value management, listed companies and related parties must enhance compliance awareness and not engage in illegal activities such as market manipulation or insider trading under the guise of market value management.

We will soon seek public opinion on the market value management guidelines. At the same time, we will work with relevant ministries to promote the establishment of market-based incentive and constraint mechanisms for share buybacks by listed companies, stimulating the internal motivation of major shareholders, executives, and other relevant parties of listed companies to further enhance their investment value.

Fengmian News

Insurance companies are important institutional investors in the capital market. Recently, the State Council issued “Opinions on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Insurance Industry,” which proposes to leverage the long-term investment advantages of insurance funds. What new measures does the Financial Regulatory Administration have to promote the pilot reform of long-term investment of insurance funds and support their participation in capital market development?

NFRA Chief Li: The State Council has just issued the new 'Ten National Measures' for the insurance industry, providing a comprehensive plan and systematic arrangement for the high-quality development of the insurance sector. China's insurance industry is facing a rare historical opportunity. It can be anticipated that China's insurance market will continue to expand, with insurance density and depth continuously improving. Insurance funds, characterized by their large scale, long duration, and stable sources, naturally possess the attributes of patient capital and will undoubtedly become important value investors supporting the healthy and sustainable development of the capital market.

The capital market undoubtedly plays a crucial role in financial stability and economic development. The Financial Regulatory Administration has always attached great importance to the capital market, actively guiding banks, insurance, and asset management institutions to maintain capital market stability. Previously, with the approval of the State Council, we promoted China Life Insurance and New China Life Insurance to launch a pilot program, jointly initiating the establishment of private securities investment funds to raise insurance funds for capital market investment. This fund, with a registered capital of 50 billion yuan, has officially begun investment operations and is currently progressing smoothly.

Moving forward, we will continue to support the sustained and stable development of the capital market. First, we will expand the pilot reform of long-term investment of insurance funds, supporting other qualified insurance institutions to establish private securities investment funds, further increasing investment in the capital market. Second, we will supervise and guide insurance companies to optimize their assessment mechanisms, encouraging insurance funds to engage in long-term equity investments. Third, we will encourage wealth management companies and trust companies to strengthen their equity investment capabilities, issue more long-term equity products, actively participate in the capital market, and cultivate and strengthen patient capital through multiple channels.

Economic Daily reporter:

In the recent past, Central Huijin Investment has significantly increased its holdings of ETFs. What is the CSRC's view on this?

CSRC Chief Wu Qing:

The capital market is a highly transparent market. As everyone has observed, Central Huijin Investment has continuously increased its holdings in ETFs over the past period. This fully demonstrates the high recognition of the A-share market's investment value by national investment institutions. It has played a crucial role in stabilizing the market and boosting confidence.

We have noted that many domestic and foreign investment institutions and research organizations also believe that the A-share market's valuation is at a historical low, highlighting its investment value. The CSRC will work with relevant parties to further support Central Huijin Investment's arrangements to increase its holdings and expand its investment scope. We will promote investment in the stock market by various medium and long-term funds, including Central Huijin Investment.

Director Yunze just mentioned arrangements to support insurance companies entering the market. We will also actively support various funds, including insurance funds, to increase their market participation and provide a better policy environment. We will further enhance strategic reserve forces and jointly promote the stable and healthy development of the capital market with full effort. Thank you.

Financial News:

What are the main considerations for creating securities, fund, and insurance swap facilities and special re-lending to support share buybacks by listed companies and increased shareholdings by major shareholders? How will the central bank carry out these operations?

PBoC Chief Pan Gongsheng:

To maintain the stability of China's capital market and boost investor confidence, based on international experience and the People's Bank of China's (PBOC) own past practices, the PBOC has consulted with the China Securities Regulatory Commission (CSRC) and the Financial Regulatory Administration to create two structural monetary policy tools to support the stable development of the capital market. This is the first time the PBOC has innovated structural monetary policy tools to support the capital market.

The first tool is a swap facility for securities, fund, and insurance companies. This supports eligible securities, fund, and insurance companies, which will be determined by the CSRC and Financial Regulatory Administration according to certain rules. These institutions can use their held bonds, stock ETFs, CSI 300 constituent stocks, and other assets as collateral to swap for highly liquid assets such as government bonds and central bank bills from the central bank. Government bonds and central bank bills differ greatly in credit rating and liquidity compared to other assets held by market institutions. Many institutions have assets that are currently less liquid. By swapping with the central bank, they can obtain higher quality, more liquid assets, which will significantly enhance their ability to obtain funds and increase stock holdings. We plan for the initial swap facility operation to be 500 billion yuan, with the possibility of expanding the scale in the future. I told Chairman Wu Qing that if this works well, after the first 500 billion yuan, we can do another 500 billion, and even a third 500 billion - I think it's all possible and open. The funds obtained through this tool can only be used for investing in the stock market.

The second tool is a re-lending facility for stock buybacks and increased shareholdings. This tool guides commercial banks to provide loans to listed companies and major shareholders for buybacks and increased shareholdings of listed company stocks. In fact, shareholders and listed companies buying back or increasing holdings of company stocks is a very common transaction in international capital markets. The central bank will issue re-lending to commercial banks, providing 100% funding support at a re-lending rate of 1.75%. Commercial banks will lend to clients at around 2.25%, adding 0.5 percentage points. This 2.25% interest rate is very low now. The initial quota is 300 billion yuan. If this tool is used well, as I discussed with Chairman Wu Qing, we can do another 300 billion, and even a third 300 billion - it's all possible. But we'll need to assess the market situation later. This tool applies to listed companies of different ownership structures, including state-owned enterprises, private enterprises, and mixed-ownership enterprises - we don't discriminate based on ownership. The PBOC will work closely with the CSRC and Financial Regulatory Administration, and we also need the cooperation of market institutions to successfully implement this work.