Speakers:
Xu Hongcai, vice minister of finance
Liu Guoqiang, vice governor of the People's Bank of China
Zhou Liang, vice chairman of the China Banking and Insurance Regulatory Commission
Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office of China
Date:
April 3, 2020
Hu Kaihong:
Good morning, ladies and gentlemen. Welcome to the Joint Prevention and Control Mechanism of the State Council press conference. Today we have invited Xu Hongcai, vice minister of finance, Liu Guoqiang, vice governor of the People's Bank of China (PBC), China's central bank, and Zhou Liang, vice chairman of the China Banking and Insurance Regulatory Commission (CBIRC). They will introduce the measures taken by the Chinese Government to increase the scale of special local government bonds and provide inclusive financial support to micro, small and medium-sized enterprises and will also answer your questions.
Let's first give the floor to Mr. Xu.
Xu Hongcai:
Good morning, ladies and gentlemen and media friends.
Increasing the special local government bond quota allocated in advance can help accelerate bond issuance and use, which is of great importance in stepping up macroeconomic control and striking a balance between epidemic prevention and social and economic development. The Central Committee of the Communist Party of China (CPC) and the State Council have attached great importance to this. Xi Jinping, general secretary of the CPC Central Committee, stressed that proactive fiscal policy should be strengthened, the fiscal deficit ratio be raised as appropriate, special treasury bonds be issued and special local government bonds be increased at a meeting of the Political Bureau of the CPC Central Committee, a meeting of the Standing Committee of the Political Bureau of the CPC Central Committee, and a meeting for coordinating COVID-19 prevention and control and social and economic development.
Premier Li Keqiang has presided over meetings of the Central Leading Group for Epidemic Control and State Council executive meetings where he has called for accelerating the issuance and proper use of special local government bonds, and paving the way for projects to start or resume construction as soon as possible to bolster and expand effective investment. Vice Premier Han Zheng and other State Council leaders have also made clear their requirements. The State Council executive meeting held on March 31 decided to release some special local government bond quota in advance to promote and expand effective investment. The Ministry of Finance (MOF) has implemented the decisions and plans of the CPC Central Committee and the State Council.
This year, in line with the decisions of the CPC Central Committee and the State Council and the authorization of the Standing Committee of the National People's Congress, China's top legislature, the MOF released 1.29 trillion yuan of newly added special local government bond quota. As of March 31, various areas across China issued 1.08 trillion yuan of newly added special bonds, accounting for 84 percent of the quota and increasing 63 percent year on year. It is estimated that China will accomplish the bond issuance task two and a half months in advance. The amount of newly added special bonds spent on projects was 825.5 billion yuan, accounting for 77 percent of the total. According to the requirements of the State Council executive meetings, the newly added special bonds issued by local governments should all be used for building transportation infrastructure such as railways and major infrastructure projects in environmental protection, agriculture, forestry, water resources, municipal utility projects and industrial parks.
The amount of special bonds used as capital fund for major projects was about 130 billion yuan, which will help promote private capital and expand effective investment. The duration of the newly added special bonds is 14.5 years on average. Of these, 933.1 billion yuan will have a duration of over 10 years, accounting for 86 percent of the total, up 52 percentage points from 2019. The duration is more reasonable compared to previous years and better suits the duration of relevant projects. On the whole, the issuance and use of newly added special local government bonds are going smoothly.
The State Council executive meeting held on March 31 decided to allocate another batch of special local government bond quota in advance in accordance with procedures while ensuring the issuance and use of the quota that had already been released. This arrangement has been made based on factors such as the 2020 fiscal budget, local project construction requirements and the progress of the issuance and use of special local government bonds. The MOF will move to implement the recent decision. The bonds will continue to be used for major infrastructure projects decided upon at State Council executive meetings, including transportation, energy, agriculture, forestry, water resources, environmental protection, people's livelihood, cold-chain logistics, urban utility projects and industrial parks.
In the meantime, we have optimized the use of bonds based on epidemic control and changes in funding needs. Major national strategic projects have been prioritized and will get key support. Old compound renovation has been added to the list of areas where special bonds can be used. The special bonds can also be used for emergency medical care, public health, vocational education and urban utility facilities such as heating and gas supply. Construction of new infrastructure such as 5G networks, data centers, artificial intelligence, logistics and the Internet of Things will be accelerated. Quota allocation will be tilted in favor of places with a large number of major projects and low epidemic risks. Meanwhile, a larger proportion of this year's newly added special bonds will be used as capital fund for major projects to mobilize more private investment.
In line with the decisions of the CPC Central Committee and the State Council, the MOF and other departments have guided and urged local governments to make preparations and carry out review, approval and selection of projects in advance. The newly added special bonds will be used to finance projects on the ground and will effectively drive the economy.
In addition, the MOF has also placed great importance in supporting the financing and development of micro and small enterprises. Since the start of the epidemic, the MOF has worked with the PBC and the CBIRC to implement a series of measures to encourage the state financing guarantee fund and local government financing guarantee and re-guarantee institutions to reduce fees, exempt counter guarantee requirements, improve service efficiency and provide credit enhancement services for micro and small enterprises. Repayment of guaranteed loans for startups that meet certain requirements can be postponed and micro and small enterprises will have priority in getting loans and interest discounts. The MOF will continue to work with the PBC and the CBIRC to guide financial institutions to increase support for micro and small enterprises to tide them over through the difficulties. Thank you.
Hu Kaihong:
Thank you, Mr. Xu. Next, let's give the floor to Mr. Liu.
Liu Guoqiang:
Good morning, media friends. In the face of the impact of the novel coronavirus outbreak on micro, small and medium-sized enterprises, the PBC has taken swift action to confront the new challenges to expand domestic demand, help the resumption of production and stabilize employment under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era and the decisions and plans of the CPC Central Committee and the State Council.
We have launched a series of measures to provide targeted financial services for epidemic prevention and control, resumption of production, and the development of the real economy.
First, we have maintained reasonable and ample liquidity. The central bank injected 1.7 trillion yuan into the market to provide short-term liquidity after financial markets reopened. After reducing the reserve requirement ratio by 0.5 percentage point at the beginning of the year in order to release 800 billion yuan, we cut the banks' reserve requirement ratio in a targeted approach to release 550 billion yuan in long-term funding for issuing inclusive loans.
Second, we have provided targeted relending and rediscount support by establishing a 300-billion-yuan relending program for epidemic control, with over half diverted to micro, small and medium-sized enterprises. The discounted interest has helped reduce micro and small enterprises' interest cost to less than 1.3 percent. In addition, we have granted another relending and rediscount quota of 500 billion yuan and reduced the interest rate of relending for agriculture and small enterprises by 0.25 percentage point to 2.5 percent. We have also used low-cost inclusive funding to support micro, small and medium-sized enterprises in critical sectors to resume production.
Third, we have guided the interest rate lower. After the central bank cut the reverse repo rate by 20 basis points on March 30, cumulatively the rate had been cut by 30 basis points so far this year.
Fourth, we have mobilized the whole financial system to work together. We have urged large state-owned banks to step up inclusive support for micro and small enterprise, offered special-purpose credit support through policy banks, guided local banks to provide better services and strengthened counter-cyclical adjustment.
All these measures are now showing remarkable results. M2 and non-governmental financing growth rates are largely consistent with and a little higher than that of nominal GDP. Against the backdrop that the real economy is not yet fully resumed, the growth of newly increased loans has hit a record high. Micro, small and medium-sized enterprises are getting more credit at lower financing costs. The money market interest rate level is falling. Meanwhile, the renminbi exchange rate remains stable, while external financial risks are being effectively controlled.
The 88th State Council executive meeting decided to further strengthen inclusive financial support to micro, small and medium-sized enterprises. First, 1 trillion yuan of relending and rediscount quota will be provided to small and medium-sized banks, in addition to the 300 billion yuan and 500 billion yuan previously mentioned. This will be a continuing process that will help a large number of micro, small and medium-sized enterprises suffering high financing costs to obtain relending and rediscount.
Second, further targeted cuts to the reserve requirement ratio will be carried out for small and medium-sized banks. With a large number of widespread outlets that mainly serve grassroots clients, these banks are inclusive by nature. In other words, unable to meet the needs of large clients, they have to serve small businesses. Implementing a lower reserve requirement ratio at these banks will be an important measure to continue financial supply-side reform. Through reform, the financial supply structure and credit fund allocation will be optimized, so that small and medium-sized banks can better focus on micro, small and medium-sized enterprises, increase credit supply, lower financing costs and contribute more to the real economy.
Third, bond financing will be further enhanced. The authorities will support financial institutions to issue 300 billion yuan in financial bonds to specifically support micro and small businesses, and guide net financing in corporate credit bonds to increase by 1 trillion yuan over last year. These will be conducive to increasing financial institutions' funding sources, expanding the channels of diversified low-cost financing for businesses and improving financial services.
In the future the prudent monetary policy will be more flexible and moderate. Sticking to the worst-case-scenario thinking and considering changes in epidemic control and economic conditions, we will control the focus and pace of our policies, and give greater prominence to supporting the recovery of the real economy. We will strengthen the aggregate adjustment of monetary policy and counter-cyclical adjustment, balance the relationship among stabilizing growth, preventing risks and controlling inflation, and ensure that M2 and non-governmental financing growth rates are largely consistent with and a little higher than that of nominal GDP. Taking into consideration the characteristics of micro, small and medium-sized enterprises and current constraints, we will work to implement the existing measures to help enterprises out of difficulties. In addition, we will enhance international cooperation and guide market expectations through multiple channels. Thank you.
Hu Kaihong:
Thank you, Mr. Liu. Next, the floor goes to Mr. Zhou.
Zhou Liang:
Good morning. Under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at the core, the whole nation is united. Epidemic control in China is continuing to improve and consolidate, production is resuming in an orderly manner and the recovery of economic and social order is accelerating. But the global spread of the virus is now growing, increasing the risk of a global economic recession. China's economic and social development is facing external risks.
General Secretary Xi Jinping urged the intensification of macro control and the implementation of macro policies to provide more targeted financial services for epidemic control, the resumption of production and the development of the real economy. Under the decisions and plans of the CPC Central Committee and the State Council, and the leadership of the Financial Stability and Development Committee of the State Council, the CBIRC has implemented a series of measures to guide banking and insurance institutions to support enterprises in resuming production and maintaining financial security and stability, which have borne abundant fruit. Figures showed that in the first quarter of 2020, the banking sector granted nearly 7 trillion yuan in new loans, up by 1.18 trillion yuan year on year, giving powerful support to the development of the real economy. Insurance institutions have also played their safeguarding and stabilizing role in society. Meanwhile, banking and insurance institutions have fulfilled their social responsibilities, donating about 2.7 billion yuan to the fight against the virus. In cooperation with Chinese embassies in foreign countries, they have provided facemasks, disinfectants and other anti-epidemic materials free of charge to overseas Chinese students and staff members of Chinese-funded enterprises and institutions overseas. In addition, they have made donations within available resources to 59 countries and regions seriously hit by the epidemic.
By carrying out the decisions and plans of the CPC Central Committee and the State Council, the CBIRC will implement various policies, comprehensively improve the quality and results of serving the real economy, control financial risks and deepen financial reform in the future, with the aim of contributing to winning the battle against the epidemic and ensuring steady and sound economic and social development. Thank you.
Hu Kaihong:
Thank you, Mr. Zhou. Now we will take questions.
