China.org.cn | October 18, 2024
Shou Xiaoli:
The press conference has been going on for an hour and a half. Due to time constraints, this will be the last question.
Financial News:
What are the main considerations for establishing securities, funds, insurance swap facilities, and special reloans to support listed companies' buybacks and increase the stock holdings of major shareholders? How will the central bank carry out these operations? Thank you.
Pan Gongsheng:
Thank you for your questions. To maintain the stability of China's capital market and bolster investor confidence, the PBC, in consultation with the CSRC and the NFRA, has pioneered two structural monetary policy tools to support the stable development of the capital market. This was done drawing on international experience and the PBC's own past practices. This marks the first time the PBC has innovated structural monetary policy tools to support the capital market.
The first tool is a swap facility for securities, funds and insurance companies. This supports qualified securities, funds and insurance companies, which will be determined by the CSRC and the NFRA based on specific criteria. These institutions can use their holdings of bonds, stock ETFs, CSI 300 constituent stocks and other assets as collateral to exchange for highly liquid assets such as government bonds and central bank bills from the central bank. Government bonds and central bank bills differ significantly in credit rating and liquidity compared to other assets held by market institutions. Many institutions have assets on hand, but liquidity is relatively poor under current circumstances. By exchanging with the central bank, they can obtain high-quality, highly liquid assets, greatly enhancing their ability to obtain funds and increase stock holdings. We plan the initial scale of swap facility operations to be 500 billion yuan, with potential for future expansion depending on the situation. As I discussed with Mr. Wu, if this goes well, we can consider additional rounds of 500 billion yuan or even a third 500 billion yuan. I think all these options are possible and open for consideration. The funds obtained through this instrument can only be used to invest in the stock market.
The second tool is a reloan program to support stock buyback and increased holding. This tool guides commercial banks in providing loans to listed companies and major shareholders for buying back and increasing holdings of listed companies' shares. In fact, share repurchases or increases by shareholders and listed companies are very common transactions in international capital markets. The central bank will issue reloans to commercial banks, providing 100% funding support at a 1.75% reloan interest rate. Commercial banks will lend to customers at about 2.25%, adding 0.5 percentage point, which is still very low. The initial quota is 300 billion yuan, and if this tool is used well, as I told Mr. Wu, we can add another 300 billion yuan or even a third 300 billion yuan. All of this is possible. However, we'll need to assess the market situation later. This tool applies to listed companies of different ownership structures, including state-owned, private and mixed-ownership enterprises. We don't distinguish between ownership structures. The PBC will work closely with the CSRC and the NFRA. We will also need market institutions' cooperation to implement this effectively.
Thank you all.
Shou Xiaoli:
Thank you to our three speakers, and thank you to all the journalists for your participation. This concludes today's press conference.
Translated and edited by Wang Yiming, Yan Bin, Yuan Fang, Xu Kailin, Ma Yujia, Mi Xingang, Wang Yanfang, Zhang Jiaqi, Wang Qian, Zhu Baichen, Huang Shan, Yang Xi, Li Huiru, David Ball, Rochelle Beiersdorfer, and Jay Birbeck. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.