Read in Chinese
Speakers:
Mr. Pan Gongsheng, governor of the People's Bank of China (PBC)
Mr. Li Yunze, minister of the National Financial Regulatory Administration (NFRA)
Mr. Wu Qing, chairman of the China Securities Regulatory Commission (CSRC)
Chairperson:
Ms. Shou Xiaoli, director general of the Press Bureau of the State Council Information Office (SCIO) and spokesperson of the SCIO
Date:
Sept. 24, 2024
Shou Xiaoli:
Ladies and gentlemen, good morning. Welcome to this press conference held by the State Council Information Office (SCIO). Today, we are glad to have invited Mr. Pan Gongsheng, governor of the People's Bank of China (PBC); Mr. Li Yunze, minister of the National Financial Regulatory Administration (NFRA); and Mr. Wu Qing, chairman of the China Securities Regulatory Commission (CSRC). They will brief you on financial support for high-quality economic development and answer your questions. Now, I'll give the floor to Mr. Pan for his introduction.
Pan Gongsheng:
Thank you, Ms. Shou. Good morning everyone. It's a pleasure to meet with you all again. I would like to sincerely thank you all for your continued interest in and support for the reforms and developments in the financial sector, as well as the work of the PBC.
This year, the PBC has remained committed to the fundamental goal of serving the real economy through financial services, while maintaining a supportive monetary policy stance. We made several major adjustments to monetary policy in February, May and July.
In terms of overall monetary policy, we have utilized a range of tools, including lowering the reserve requirement ratio (RRR), reducing policy interest rates, and guiding the decline of the loan prime rate (LPR), to foster a favorable monetary and financial environment.
In terms of monetary policy structure, we have focused on key areas of high-quality development, introducing re-lending programs for technological innovation and technical upgrading, while increasing financial support for technological innovation and equipment renewal. We have also reduced the down payment ratio and mortgage rates for home loans, lowered the housing provident fund loan rates, and established a re-lending program for affordable housing, using market-oriented methods to accelerate the reduction of inventory in the commercial housing market.
Regarding monetary policy transmission, we have reformed the way we calculate the quarterly value-added of the financial sector. The previous calculation method, which primarily relied on the growth rates of loans and deposits, has been replaced by an income-based approach. This reform aims to rectify and standardize practices such as manual interest adjustments and idle funds, thereby unlocking the potential of existing but inefficient financial resources, enhancing the effectiveness of fund utilization, and improving the efficiency of monetary policy transmission.
On the exchange rate front, we have upheld the market's decisive role in exchange rate formation, maintained flexibility, guided expectations, and kept the RMB exchange rate stable at a reasonable and balanced level.
The effects of our monetary policy have become increasingly evident. By the end of August, total social financing had grown by 8.1% year on year, and RMB loans had increased by 8.5%, outpacing nominal GDP growth by around 4 percentage points. Meanwhile, financing costs remain at a historic low.
In line with the central government's directives, the PBC will continue to uphold a supportive monetary policy stance, strengthen monetary policy regulation, and enhance precision in its execution to foster a monetary and financial environment conducive to stable economic growth and high-quality development.
I would like to take the opportunity of today's press conference to announce several new policies:
First, we will lower the RRR and policy interest rates, which will drive down market benchmark rates. Second, we will lower mortgage rates on existing home loans and standardize the minimum down payment ratio for mortgages. Third, we will introduce new monetary policy tools to support the stable development of the stock market.
First, lowering the RRR and policy interest rates. We will cut the RRR by 0.5 percentage point in the near term, providing approximately 1 trillion yuan in long-term liquidity to the financial market. Depending on liquidity conditions, we may further reduce the RRR by 0.25 to 0.5 percentage point this year. Additionally, we will lower the central bank's policy interest rate, reducing the seven-day reverse repo rate by 0.2 percentage point — from 1.7% to 1.5%. In addition, we will guide LPR and deposit rates downward in tandem, ensuring the stability of commercial banks' net interest margins.
Second, lowering mortgage rates on existing home loans and standardizing the minimum down payment ratio for mortgages. We will guide commercial banks to reduce interest rates on existing mortgages to a level similar to those of newly issued housing loans, with an expected average reduction of around 0.5 percentage point. The minimum down payment ratio for both first and second homes will be unified, with the nationwide minimum down payment ratio for second homes to be reduced from 25% to 15%. We will increase support for the 300-billion-yuan special refinancing program for affordable housing, launched in May, raising the central bank's funding support ratio from 60% to 100%, strengthening incentives for commercial banks and homebuyers. Additionally, in coordination with the NFRA, we will extend the expiration of two key policy documents — on operational property loans and the 16-point policy plan proposed in 2022 — from the end of this year to the end of 2026.
Third, introducing new monetary policy tools to support the stable development of the stock market. The first is creating a swap facility for securities, funds and insurance companies, enabling eligible ones to obtain liquidity from the central bank through asset pledges. This will significantly enhance their capacity to access funds and increase their stock holdings. The second is creating special re-lending for stock repurchases and shareholding increases, guiding banks to provide loans to listed companies and major shareholders to support these activities.
We will release the relevant policy documents or announcements on the PBC's website in the near future.
That concludes my introduction. Later, I will join Mr. Li and Mr. Wu to answer your questions. Thank you.
Shou Xiaoli:
Thank you, Mr. Pan. Now, I'll give the floor to Mr. Li for his introduction.
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Li Yunze:
Thank you, and good morning everyone. It's a pleasure to meet you all. First, on behalf of the NFRA, I would like to extend my sincere gratitude to the media for your long-standing support and assistance in our financial regulatory work.
This year, the NFRA has firmly implemented the major decisions of the Central Committee of the Communist Party of China (CPC) and the State Council. We have taken proactive actions, faced difficulties head-on, and coordinated the promotion of three key tasks: preventing risks, strengthening regulation and promoting development. Solid progress has been made in all areas.
On risk prevention, we have concentrated on key areas and steadily advanced risk mitigation efforts, aiming to create a secure and stable financial environment for economic development. In line with the directives of the Central Financial Work Conference, we have actively promoted reforms and risk mitigation for small- and medium-sized financial institutions, preventing risks from spilling over or spreading. Currently, regions with a high concentration of high-risk institutions have formulated concrete reform and risk mitigation plans, which are being implemented prudently under a "one province, one policy" approach. At the same time, we have guided banks and insurance institutions to actively assist in resolving risks related to the real estate sector and local government debt. Currently, China's financial sector, particularly large financial institutions, is operating in a stable and sound manner, with risks under control. As risks associated with the real estate sector, local government debt, and small- and medium-sized financial institutions are gradually being resolved and alleviated, financial risks are steadily receding. We are committed to firmly maintaining the bottom line of preventing systemic financial risks.
In terms of strengthening regulation, we have focused on addressing both the symptoms and root causes of issues. By driving reform, we have tackled tough challenges and fostered compliance through regulatory frameworks, continually enhancing the sector's sustainability. We have guided the banking and insurance sectors to return to their core functions, refocusing on their primary business to achieve differentiated development and complementary strengths. We have advanced the introduction of a new 10-point guideline for the insurance industry, made timely improvements to asset management regulations, and continuously strengthened governance over non-banking institutions. Additionally, we have optimized and reinforced the foundational management of credit, aiming to resolve deep-seated issues that hinder the sustainable and healthy development of the industry. Financial institutions have been encouraged to streamline their operations, strengthen their core competencies, and actively respond to challenges such as narrowing net interest margins and losses from interest rate spreads. By concentrating on preventing substantive risks, we have effectively implemented the due diligence exemption system, while rigorously investigating and penalizing major illegal and non-compliant activities, creating a fair and just market order.
In terms of promoting development, we have focused on eliminating blockages and bottlenecks, improving the adaptability of the economy and finance and increasing financial services for key fields and weak links. We have strengthened financing guarantees for large-scale equipment upgrades and trade-ins of consumer goods and for implementing major national strategies and building security capacity in key areas, and vigorously supported the development of new quality productive forces in accordance with local conditions. As of the end of this August, loans to high-tech sectors as well as medium- and long-term loans to the manufacturing sector have increased by 13.2% and 15.9% year on year, respectively. We have scaled up micro and small loans, and increased support for private enterprises on an equal footing. Inclusive loans to small and micro enterprises and loans to private enterprises have increased by 16.1% and 9.1% year on year, respectively. We have guided insurance institutions to do their best to provide claims services for major accidents and natural disasters such as torrential rain and typhoons, helping people and business entities that are impacted overcome difficulties. In the first eight months of this year, the insurance industry has paid out a total of 1.55 trillion yuan in compensation, a year-on-year increase of 26.1%.
Next, the NFRA will actively strengthen communication with the market and our friends from the media, as well as respond to social concerns in a timely manner. Previously, Mr. Pan has shared with you relevant policy adjustments. I will have a more detailed briefing on the optimization and improvement of relevant regulatory policies in the Q&A session. We will strive to create a stable, transparent and predictable regulatory policy environment, continue effort and support to improve the quality and efficiency of serving the real economy and contribute more financial strength to high-quality development. Thank you.
Shou Xiaoli:
Thank you, Mr. Li. Now, let's give the floor to Mr. Wu for his briefing.
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Wu Qing:
Ladies and gentlemen, friends from the media, good morning. First of all, I would like to thank you for your long-term concern and support for the capital market as well as the work done by the CSRC. To implement the guiding principles from the central financial work conference, the State Council in April of this year issued new guidelines for strengthening regulation, forestalling risks and promoting the high-quality development of the capital market. We have conscientiously implemented these policies, jointly formulated a series of supporting documents in coordination with relevant departments as well as have formulated and revised more than 50 institutions and rules, establishing a "1+N" policy system together with the new guidelines. An array of key measures are also under implementation, and initial progress has been achieved in strengthening regulation, forestalling risks and promoting high-quality development of the capital market.
First, the market ecology has been further improved. We have adhered to the principle that oversight must have "teeth and thorns" and be sharp-pointed. The General Office of the State Council has forwarded a guideline issued by the CSRC and five other central departments and ministries on how to further improve the comprehensive punishment and prevention of financial fraud in the capital market. By the end of August, 577 illegal cases in the field of securities and futures have been investigated and handled, especially some major cases such as the ones involving Evergrande Real Estate Group and CNNC Hua Yuan Titanium Dioxide. Working with the Ministry of Finance, we have strictly investigated and penalized the Evergrande Real Estate Group's auditing agency PwC, forming a strong deterrent.
Second, the underlying systems of the capital market are being improved at a faster pace. Institutions and rules for issuance, listing, dividends, reduction of holdings and trading have been optimized. The dividends of listed companies in 2023 reached 2.2 trillion yuan, hitting a record high. We have strengthened the regulation of program trading, further tightened the regulation rules for program trading and have suspended the securities relending business. We have deepened the reform of lowering fee rates for the public offering fund sector and have encouraged financial institutions to put functional construction first.
Third, market functions have been basically maintained. We have conquered many difficulties and have maintained the appropriate rhythm for IPOs and refinancing. The quality and efficiency of the filing-based management of overseas listing have continuously improved. The function of the bond and futures markets have been steadily exerted. In the first eight months of this year, the exchange bond market issued 8.9 trillion yuan of various bonds, maintaining steady growth.
Fourth, the reform and innovation of the capital market have been firmly promoted. We have focused on doing a good job in five areas of finance. A number of policy catalysts such as the sixteen measures for the capital market to serve the high-level development of technology enterprises and the eight new measures for the Science and Technology Innovation Board (STAR) have been issued and implemented. Relevant work to support the development of venture capital investment has been done well. We have made mergers, acquisitions and restructuring play better roles. Nearly 50 major restructuring cases have been disclosed in the market since May of this year, and the market response has been relatively positive.
The third plenary session of the 20th CPC Central Committee made strategic arrangements for further deepening the capital market's reform. The CSRC will adhere to strengthening the foundation, strict regulation and management of the capital market, as well as will promote development and stability through reform, continuously improving the capital market's functions of investment and financing to better serve Chinese modernization. We will focus on three areas: First, we will give more prominence to the enhancement of the inherent stability of the capital market. We will establish a clear orientation of rewarding investors and improve the quality and investment value of listed companies. We will accelerate the reform of the investment side and promote the construction of a policy system for long-term investments. We will issue guidance for promoting the entry of medium and long-term funds into the capital market. We will also further improve the policy toolkit and ensure no systemic risks arise. Second, we will prioritize supporting the recovery and growth of the real economy and the high-quality development of the economy. We will focus on serving key areas such as new quality productive forces, make good use of various capital market tools, such as stocks, bonds and futures, and take multiple measures to activate the merger and acquisition market. We will also issue six measures to promote mergers and acquisitions. At the same time, we will work with all relevant parties to ensure the smooth flow of all sectors including raising funds, investing, managing and withdrawing of private equity and venture capital funds. Third, we will highlight the protection of small and medium-sized investors' legitimate rights and interests. We will resolutely crack down on illegal and irregular activities, such as financial fraud and market manipulation, and at the same time strive to establish more model cases in representative litigation and compensation in advance.
That is all for my introduction. I will continue the discussion with you later. Thank you.
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Shou Xiaoli:
Thank you, Mr. Wu. Now, the floor is open for questions. Please state the news organization you represent before asking your question. You may now raise your hands to be called upon.
CCTV:
We know that the PBC has implemented three major monetary policy adjustments this year. As Mr. Pan mentioned in the introduction, the PBC will continue to lower the reserve requirement ratio and policy interest rates in the coming stage. These policies on aggregates will play an important role in stabilizing growth, which people pay great attention to. Could you please give us more details in this regard? Thank you.
Pan Gongsheng:
Aggregates in monetary policy are also attracting great attention from all sectors of society and the market. I have said many times on different occasions that the PBC adheres to an accommodative monetary policy stance, intensifies the strength of monetary policy regulation and enhances the precision of monetary policy regulation. We have employed a combination of various monetary policy tools to support the stable growth of the real economy. In the process of designing monetary policy tool adjustments, the PBC has several important considerations: the first is to support the stable growth of China's economy; the second is about the price, which is also an important consideration in designing monetary policy tools--we must promote a moderate rebound in prices; the third is that we must take into account both support for the growth of the real economy and the health of the banking industry itself--there must be a good balance between the two parties; the fourth is the exchange rate--we must maintain the general stability of the RMB exchange rate at an adaptive, balanced level. Another point is that we pay attention to the coordination between monetary policies and fiscal policies, and support the proactive fiscal policy to work better and achieve results.
In my opening remarks, I mentioned several specific adjustments to macroeconomic policies and monetary aggregate policies. Now I will introduce them in detail.
First, we will lower the reserve requirement ratio (RRR). In February of this year, we cut the RRR by 0.5 percentage points. This time, the RRR is planned to be cut by another 0.5 percentage points, which can provide about 1 trillion yuan of long-term liquidity to the financial market. At present, the weighted average RRR for financial institutions is 7%. Among this, the current RRR for large banks is 8.5%, which will be reduced from 8.5% to 8% after this adjustment. The current RRR for medium-sized banks is 6.5%, which will be reduced from 6.5% to 6% after this adjustment. Rural financial institutions have been implementing a RRR of 5% for a few years now, and this time it will remain the same. After the implementation of the RRR reduction policy, the average RRR of the banking sector is about 6.6%. Compared with the central banks of major economies around the world, we still have room. In terms of the RRR tool, we may further lower it by 0.25-0.5 percentage points within the year, depending on the liquidity situation.
Second, concerning lowering the policy rate, the interest rate on seven-day reverse repo operations is the major policy rate of the central bank at present. In July, we lowered the seven-day reverse repos rate from 1.8% to 1.7%. This time, it was trimmed by 20 basis points from 1.7% to 1.5%. Under the market-oriented adjustment mechanism on interest rates, the adjustment of the policy interest rate will lead to the adjustment of various market benchmark interest rates. It is expected that after the adjustment of the policy rate, the medium-term lending facility (MLF) interest rate is expected to drop by approximately 0.3 percentage points, and the loan prime rate (LPR) and deposit rate may decrease by 0.2 to 0.25 percentage points.
The adjustment of the interest rate has generally had a neutral impact on banks' net interest margins. Lowering mortgage rates for existing homes will reduce interest income for banks, but it will also reduce the mortgage prepayments of customers. The central bank's cutting of the RRR is equivalent to directly providing low-cost and long-term capital for banks' operation. The MLF and open market operations are the major ways for the central bank to offer short- and medium-term capital to commercial banks. Decreasing interest rates will also lower banks' funding costs. In addition, as mentioned earlier, it is expected that the LPR and deposit rates will have symmetrical reduction. Previously, we guided deposit rates downward several times through the interest rate self-regulatory mechanism, and the repricing effect will be cumulatively revealed. The repricing of deposit rates is slower than that of loan interest rates. Therefore, as deposit rates have been guided downward, the effect of repricing will be cumulatively revealed over time. As a result, in the design of the policy adjustment plan, the PBC's technical team has carried out several rounds of careful quantitative analysis and evaluation. The interest rate adjustment this time has had a neutral impact on banks' income and the net interest margin will remain basically stable. Thank you.
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China Securities Journal:
The third plenary session of the 20th CPC Central Committee proposed improving the functions of the capital market to give balanced weight to investment and financing, and to facilitate the entry of long-term capital into the market. Relevant authorities have also been calling for and promoting long-term investment and value investment. What will be done next to better advance the entry of long-term capital into the market to promote balance between investment and financing?
Wu Qing:
Let me answer this question. Long-term capital is indeed extremely important. Medium and long-term capital investment operations have a high degree of specialization and strong stability, which is of great significance for overcoming short-term market fluctuations and playing the role of "stabilizer" and "ballast" in the capital market. In recent years, the CSRC has vigorously advanced the development of public equity funds and has worked with relevant parties to promote the entry of medium- and long-term funds into the market, achieving some phased results. By the end of this August, the total A-share market capitalization held by professional institutional investors such as equity public funds, insurance funds and various pensions was nearly 15 trillion yuan, more than double that at the beginning of 2019, and the proportion of which in the A-share market increased from 17% to 22.2%. Among these, the National Social Security Fund is very prominent. Since its establishment, the average annualized rate of return of the National Social Security Fund has exceeded 10% in the domestic stock market, becoming an exemplar of long-term investment and value investment in the A-share market.
At the same time, we also see that there are still prominent problems in the capital market. These include insufficient medium- and long-term funds, sub-optimal structure, the leading role has not been given full play, and the institutional environment for "long-term investment of long-term capital" has not yet been fully established. In order to implement the guiding principles of the third plenary session of the 20th CPC Central Committee and further remove the barriers that affecting the entry of the medium- and long-term capital into the market, with the strong support of relevant ministries and ministerial-level commissions, the CSRC and other relevant departments have formulated guidelines to promote medium- and long-term capital into the market, which will be issued in the near future. The guidelines include a series of arrangements to support the entry of medium- and long-term capital into the market, and it is believed that the institutional environment will continue to be optimized. In general, it focuses on the goal of "more long-term capital with longer terms and better returns" and further promotes the entry of medium- and long-term funds into the market. The soon-to-be-published guidelines give priorities to measures in three aspects:
First, we will strive to develop public equity funds. We will give priority to urging fund companies to further adopt the right approach to growing businesses, adhere to the orientation of investment return, improve investment research and service capabilities, create more products that meet the needs of the people, and strive to create long-term returns for investors. Recently, you may have also noticed that 10 new CSI A500 exchange-traded funds (ETFs) were approved, which have been very popular with the market and soon reached the limit for fundraising. Next, we will further optimize the registration of equity fund products, vigorously promote the innovation of index products such as broad-based ETFs, and launch more small- and mid-cap ETF fund products, including ChiNext and STAR Market in a timely manner, to better serve investors, the national strategy and the development of new quality productive forces. In addition, we will promote the steady reduction of the general rate of the public equity fund sector, which is also an issue that has been discussed a lot recently. We have now taken two steps, and there is still one step remaining. By steadily lowering the general rate, we can better benefit and reward investors.
Second, we will improve the institutional environment for "long-term investment of long-term capital." We will give priority to improving the inclusiveness of supervision over medium- and long-term capital equity investment, and fully implement long-term assessments of three-years and above. We will remove the institutional barriers to long-term investment of insurance funds and propel insurance institutions to be firm value investors, to provide stable long-term investment for the capital market. At the same time, we will guide the sound interaction between multilevel and multi-pillar aged-care social protection system and the capital market, improve the investment policy system for national social security funds and basic old-age insurance funds, and encourage annuity funds to explore different types of differentiated investment according to the different ages and risk preferences of holders.
Third, we will continue to improve the ecology of the capital market. We will give priority to taking multiple measures to enhance the quality and investment value of listed companies and improve the supporting institutional arrangements for institutional investors to participate in the governance of listed companies. At the same time, we will crack down on all kinds of violations of laws and regulations and foster a sound market ecology in which medium- and long-term capitals are "willing to come and stay and can develop well."
Next, we will work with relevant ministries and ministerial-level commissions as well as relevant units to step up efforts to ensure the implementation of all measures. Thank you.
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21st Century Business Herald:
Large commercial banks play a crucial role in the financial system. What measures will the financial regulatory authorities take in the near future to promote the prudent operation of large banks? In June, the State Council issued the "Several Policy Measures for Promoting the High-Quality Development of Venture Capital," which proposed expanding the scope of trials for equity investment of financial asset investment companies under large banks. What implementation measures have been adopted?
Li Yunze:
Thank you for your question. I will answer this one. As you just mentioned, large commercial banks are the mainstay of serving the real economy in the financial system and the ballast for maintaining financial stability. At present, the operation and development of large commercial banks is making steady progress, the quality of assets is stable, and major regulatory indicators are within a healthy range.
As you all know, capital is the basis for the operation of financial institutions and it is also the foundation for improving the capability to serve the real economy and the barrier to resist risks. In recent years, large commercial banks have mainly relied on their own profit retention to increase capital, but with the continuous increase in bank fee reductions and interest concessions, net interest margins have narrowed, and profit growth has gradually slowed. Therefore, it is necessary to coordinate internal and external channels to replenish capital.
In order to consolidate and enhance the ability of large commercial banks to steadily operate and develop, and give better play to their role as the mainstay in serving the real economy, after research, China has planned to increase the tier-1 capital of the six large commercial banks. This will be implemented in an orderly manner, utilizing an approach of "coordinated advancement, in tranches and batches, and one policy for one bank." We will also continue to urge large commercial banks to improve their refined management level and strengthen their capabilities to pursue high-quality development under capital constraints.
At present, indirect financing still occupies a dominant position in China's aggregate private financing, which means we need to embark on a development path for technology finance with Chinese characteristics, especially sci-tech innovation investment. In the early stages, financial asset investment companies under the large commercial banks have launched pilot projects for equity investment in Shanghai, exploring the path, gaining experience and training teams. The conditions for carrying out the pilot project on a larger scale have already been put in place. According to the relevant arrangements of the State Council, in order to give full play to the leading and driving role of the pilot projects and encourage the development of venture capital, we plan to take the following measures in three aspects: First, we will carry out pilot projects in more cities. We will work with relevant departments to expand the scope of the pilot projects from Shanghai to 18 large and medium-sized cities with vibrant sci-tech innovation activities such as Beijing. Second, we will relax restrictions. We will appropriately relax the restrictions on the amount and proportion of equity investment, increasing the proportion of on-balance sheet investment from the original 4% to 10%, and raise the proportion of investment in single private equity funds from the original 20% to 30%. Third, we will optimize the assessments. We will guide relevant institutions to implement the requirements that no one who has fulfilled their duties is held liable and establish and improve long-term and differentiated performance evaluations. Next, we will summarize our experience in a timely manner and continue to carry out pilot projects in more cities. At the same time, we will continue to optimize supporting policies and actively advance the implementation of more projects as soon as possible.
That is all from me. Thank you.
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Reuters:
Home prices are falling every month, and declines in home prices are in double digits in many Chinese cities, despite all the measures taken to attract new home buyers and to lighten the mortgage burdens of home owners. So, my question is: Have financial regulatory authorities reached the limits of monetary policy? Thank you.
Pan Gongsheng:
Thank you for your question. It's a very good question and one that is of widespread concern. Based on our responsibilities, we mainly support risk mitigation and the healthy development of the real estate market from a financial perspective. In recent years, the PBC has continuously improved macroprudential policies in real estate finance, taking comprehensive measures on both the supply and demand sides. This includes multiple reductions in the minimum down payment ratio for personal housing loans, lowering loan interest rates, removing the lower bound on interest rates, and establishing a relending policy to support the acquisition of completed commercial housing for affordable housing. In order to implement the central government's decisions and arrangements on promoting the stable and sound development of the real estate market, the PBC, along with the NFRA, has introduced five new financial policies for real estate.
The first policy is to guide banks to reduce interest rates on existing mortgages. Last August, the PBC encouraged commercial banks to orderly reduce interest rates on existing mortgages, and the results were fairly good. After the floor for mortgage rates was lifted nationwide on May 17 of this year, we removed the lower bound, which used to involve adjustments based on loan prime rate (LPR), and expanded the room for rate reductions on newly issued loans, leading to a significant drop in interest rates. This widened the interest rate gap between old and new mortgages once again, especially in large cities like Beijing, Shanghai, Shenzhen and Guangzhou. The original rates were relatively high. After the adjustments, the difference between the interest rates on newly issued and existing mortgages became even larger. In response, the PBC plans to guide banks to make bulk adjustments to interest rates on existing mortgages, lowering them to be closer to rates on new loans. We expect the average reduction to be around 0.5 percentage points. Since loans were issued at different times and rates vary across regions and banks, this is an estimated average reduction. Lowering the rates on existing mortgages will help reduce the interest burden on borrowers, benefiting estimated 50 million households or about 150 million people. This is expected to reduce the total annual interest payments by around 150 billion yuan for households, which will help boost consumption and investment, reduce early repayment behaviors and limit opportunities for the illegal replacement of existing housing loans. Thus, protecting the legal rights of financial consumers and supporting the stable and sound development of the real estate market.
We will officially release this policy document soon. Since it involves many borrowers, banks will need some time to make the necessary technical preparations, so it is expected that banks may not handle this immediately. I would advise people not to rush to the banks this afternoon. Moving forward, we are also considering guiding commercial banks to improve their mortgage pricing mechanisms, allowing banks and customers to negotiate dynamic adjustments in a market-based way.
The second policy is to unify the minimum down payment ratio for both first and second homes at 15%. To better support the essential need of urban and rural residents for a home to live in and their diverse demands for better housing, the minimum down payment ratio for personal housing nationwide will no longer differentiate between first and second homes, and will be uniformly set at 15%. After May 17, the minimum down payment ratio for first homes has already been 15%, while for second homes it was 25%. This time, we unify the down payment ratio for both first and second homes to be 15%. I would like to clarify two points here: Local governments can implement policies based on their own conditions, independently determine whether to adopt differentiated policies and set the minimum down payment ratio within their jurisdictions. Given the vast differences in real estate markets across cities and regions in such a large country, local governments can make differentiated arrangements on the minimum down payment ratio within the national baseline. The other point is commercial banks may negotiate with clients to determine the specific down payment ratio, based on an assessment of clients' risks and their own willingness. The 15% is just a minimum; banks may require a higher down payment based on their risk assessment, and some clients may choose to make larger down payments, such as 30%. Thus, this would be a market-based negotiation between the bank and the individual.
The third policy is to extend the deadlines for two real estate finance policy documents. Previously, the PBC and the NFRA issued two policies: the 16 financial measures and the operating property loan policy. Both of these have played a positive role in promoting the stable and sound development of the real estate market and resolving risks. The time-limited policy of extending existing financing for real estate companies and the operating property loan policy were originally set to expire on December 31, 2024. This time, we have decided to extend these two policies until December 31, 2026.
The fourth policy is to optimize the relending policy for government-subsidized housing. On May 17, the PBC announced the establishment of a 300-billion -yuan relending facility for government-subsidized housing. The facility guides financial institutions, in accordance with market-oriented and law-based principles, to support local state-owned enterprises in purchasing unsold completed commercial housing at reasonable prices for use as government-subsidized housing for sale or rent. This is an important measure to reduce real estate inventory. To further enhance market incentives for banks and purchasing entities, we are increasing the PBC's funding share in the relending program from 60% to 100%. Previously, for every 10-billion-yuan loan issued by commercial banks, the PBC provided six billion yuan in funding. Now, for every 10-billion-yuan loan, the PBC will provide 10 billion yuan in low-cost funding, accelerating the destocking process for commercial housing inventory.
The fifth policy is to support the acquisition of real estate companies' land reserves. In addition to allowing local governments to use part of their special bonds for land reserves, we are researching the possibility of allowing policy banks and commercial banks to provide loans to qualified enterprises for the market-based acquisition of land from real estate companies. It can help put idle land to better use and alleviate financial pressures placed on real estate companies. If necessary, the PBC can also provide relending support. We are currently working on this policy with the NFRA.
Thank you!
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Beijing Youth Daily:
Concerning small and micro enterprises, we have noticed that recently many support policies have been introduced for the financing of small and micro enterprises, and financial institutions have enhanced their efforts in providing services. The financing for small and micro enterprises has seen an increase in volume, an expansion of coverage and stable pricing. However, some of them have reported that they still face obstacles. Could you please share if the NFRA has any targeted measures in this regard? Thank you.
Li Yunze:
Thank you for your question. Small and micro enterprises are connected to numerous households and are an important force in stabilizing the economy, promoting employment and improving people's livelihoods. In recent years, we have worked with the PBC to continuously strengthen policy guidance as well as coordinate efforts from diverse parties to improve the financial services for small and micro enterprises. By the end of August this year, the balance of inclusive small and micro enterprise loans nationwide had reached 31.9 trillion yuan, a fourfold increase compared to the end of 2017, with the average interest rate decreasing by 3.5 percentage points. To further address the financial obstacles faced by small and micro enterprises, the NFRA will take two main measures.
First, we will collaborate with the National Development and Reform Commission to establish a coordination mechanism for supporting small and micro enterprises in obtaining financing. This mechanism draws on the experience from the earlier coordination mechanism for real estate financing by setting up dedicated working groups at district and county levels. These groups will work on two fronts: On one hand, they will engage with companies, conducting extensive visits to thoroughly understand the operational status and actual difficulties of small and micro enterprises, focusing on comprehensively assessing their financing needs. On the other hand, they will work with banks, recommending small and micro enterprises that comply with laws and regulations, have genuine financing needs and maintain good credit records. Banks should respond promptly and, in principle, complete credit approvals within one month to ensure that loan funds directly reach small and micro enterprises, truly bridging the "last mile" in delivering financial support.
Second, we will optimize the policy for loan renewals 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." This policy stipulates that eligible small and micro enterprises with ongoing financing needs can apply for loan renewals when their loans mature. This means they can secure continued financing without repaying the principal upon loan maturity, a service known as "loan renewals without principal repayment." This policy has been well-received by small and micro enterprises and has played a positive role in facilitating their financing. We will further optimize the policy in three aspects.
First, we will expand the scope of the renewal policy from a limited number of small and micro enterprises to include all such businesses. Any eligible small or micro enterprise with genuine financing needs and facing financial difficulties after loan maturity can apply for loan renewal support.
Second, we will temporarily extend the renewal policy to medium-sized enterprises for a three-year period. Specifically, working capital loans for medium-sized enterprises maturing before Sept. 30, 2027, can follow the renewal policy applicable to small and micro enterprises.
Third, we will adjust risk classification standards. Loans renewed for companies that operate legally, maintain continuous operations and have good credit records will not be downgraded in risk classification solely due to renewal.
To ensure effective implementation of credit support policies for small, micro and medium-sized enterprises, especially to address concerns among grassroots loan officers about granting loans to these businesses, the NFRA recently introduced a due diligence liability exemption system for inclusive financing. This system specifies situations where loan officers can be exempt from liability if they have performed due diligence, aiming to fully encourage their enthusiasm and initiative and establish a long-term mechanism where officers are confident, willing, able and proficient in providing loans.
That's all I have for now. Thank you.
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Yicai:
At the beginning of this year, we saw the establishment of a new coordination mechanism for urban real estate financing. Could you provide an update on its latest progress and outcomes? What are the next steps and new measures being considered? Thank you.
Li Yunze:
Thank you for your question. Mr. Pan has already provided a comprehensive answer regarding this year's financial policies related to the real estate sector. The stable and healthy development of the real estate market is crucial for overall economic and financial performance, as well as the immediate interests of the people. In recent years, significant changes have occurred in the supply and demand dynamics of our real estate market. The continued slowdown in sales has led to tight liquidity for property companies, making it difficult for some sold, under-construction projects to be delivered on schedule. To address this issue, the NFRA has collaborated with the Ministry of Housing and Urban-Rural Development to establish a coordination mechanism for urban real estate financing. The key feature of this mechanism is its "city-focused and project-centric" approach, distinguishing risks associated with real estate company groups from those of individual projects. By leveraging the coordinating role of local governments, it places compliant, under-construction, sold projects on a "white list," guiding financial institutions to meet reasonable financing needs of these projects. This facilitates project completion and delivery, effectively safeguarding homebuyers' lawful rights and interests.
With joint efforts from all parties, the coordination mechanism has achieved positive results. To date, commercial banks have approved over 5,700 projects on the "white list," with approved financing reaching 1.43 trillion yuan, supporting the timely delivery of more than 4 million housing units. Driven by this mechanism, financial institutions are continuously expanding their support for the real estate industry. As of late August, we've seen positive growth in real estate development loans compared to the year's start, reversing the downward trend. Loans for real estate mergers and acquisitions and housing rental loans have increased by 14% and 18%, respectively, providing strong financial support for stable and healthy real estate market development.
Additionally, to actively support essential housing needs and demand for better housing, as Mr. Pan mentioned, we've worked with the PBC to guide local governments and financial institutions in adjusting relevant real estate financial policies based on local conditions. Moving forward, we'll collaborate with the PBC to promote a gradual reduction in existing housing loan interest rates, further decreasing residents' mortgage payments and enhancing their sense of financial well-being.
Next, we will resolutely implement the decisions and arrangements of the CPC Central Committee and the State Council on real estate work. We'll further promote the effective implementation of the coordination mechanism for urban real estate financing to ensure we whitelist all eligible projects, grant all eligible loans, and fund all eligible companies. We are determined to overcome obstacles in housing delivery and promote the stable and healthy development of the real estate market.
Thank you.
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Red Star News:
Currently, the market is closely watching mergers and acquisitions (M&A) and restructuring of listed companies. You mentioned the need for multiple measures to invigorate the M&A and restructuring market. Regulatory authorities have been promoting market-oriented reform of M&A and restructuring in recent years. What specific measures will the CSRC implement next to better stimulate efficiency and vitality in the capital market's M&A and restructuring? Thank you.
Wu Qing:
Thank you for your question. M&A and restructuring are indeed significant in the capital market. Supporting corporate M&A and restructuring to further promote effective resource allocation is a crucial function of the capital market. Particularly in the context of accelerating global industrial transformation and our country's economic structural upgrading, it's imperative to leverage the key role of corporate M&A and restructuring to aid industrial integration and enhance quality and efficiency. The new "Nine Measures" make important arrangements to invigorate the M&A and restructuring market. To further stimulate market vitality, the CSRC has formulated the Opinions on Deepening the Reform of the M&A and Restructuring Market for Listed Companies, based on extensive research and input from various parties. We adhere to market-oriented approaches to better utilize the capital market as a primary channel in M&A and restructuring. The main contents of the Opinions include:
First, we will strongly support listed companies in their transformation and upgrading towards new quality productive forces. The CSRC will actively support listed companies in conducting M&A and restructuring centered on strategic emerging industries and future industries. This includes cross-industry M&A aimed at transformation and upgrading, as well as acquisitions of unprofitable assets that help strengthen industrial and supply chains and enhance core technologies in key fields. These efforts aim to guide more resources and production factors towards new quality productive forces.
Second, we will actively encourage listed companies to strengthen industrial integration. China is the only country globally with a complete range of industrial sectors. However, we also see that some industries are large but not strong, and numerous but not of high quality. While supporting emerging industries, the capital market will continue to help traditional industries improve industrial concentration and resource allocation efficiency through restructuring. We will support the integration needs of listed companies by significantly streamlining the review process. Additionally, we will encourage private investment funds to actively engage in M&A and restructuring through mechanisms such as "reverse linkage" of lock-up periods.
Third, we will further enhance regulatory tolerance, a topic of ongoing market interest. While adhering to rules, the CSRC will respect market, economic, and innovation dynamics. We will increase our tolerance for matters such as restructuring valuations, performance commitments, horizontal competition, and related-party transactions based on actual circumstances to better optimize resource allocation through market mechanisms.
Fourth, we will make significant efforts to enhance transaction efficiency in the restructuring market. Currently, payment instruments available for restructuring are quite diverse, including cash, shares, and convertible bonds. Moving forward, the CSRC will support listed companies in using payment instruments such as installment issuance of shares and convertible bonds, staged payment of transaction prices, and phased supporting financing based on specific transaction needs. This will further improve transaction flexibility and fund use efficiency. Simultaneously, we will establish a simplified review procedure for restructuring, significantly streamlining the process, shortening review timeframes, and improving efficiency for eligible listed companies.
In addition, the role of intermediary agencies is crucial in driving mergers and acquisitions (M&As) and corporate restructuring. The CSRC will guide securities firms and other intermediary agencies to further enhance their service capabilities and fully leverage their expertise in trade matchmaking and professional services to help listed companies implement high-quality M&As and restructuring. The CSRC will also properly fulfill its supervisory duty in accordance with the law, cracking down on all violations of laws and regulations, effectively safeguarding market order in enterprise restructuring and ensuring orderly restructuring processes to protect the lawful rights and interests of small- and medium-sized investors.
This concludes my response. Thank you.
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Market News International:
The Federal Reserve cut rates by 50 basis points this month. Does this create room for further easing in China's monetary policy, and how will the People's Bank of China assess the impact of the Fed rate reduction on China's foreign exchange market?
Pan Gongsheng:
Thank you for your questions. Recently, major economies have adjusted their monetary policies. As we see, the depreciation pressures on the RMB have notably eased, and the currency has started to appreciate. On Sept. 18, the U.S. Fed cut interest rates by 50 basis points, marking the first rate reduction amid its interest rate hike cycle over the past few years. Meanwhile, central banks of several other countries have also cut their interest rates. For example, the European Central Bank (ECB) has reduced its interest rate twice since June, by a total of 50 basis points; the Bank of England (BoE) lowered rates by 25 basis points in August; and the central banks of Canada and Sweden also cut their interest rates. The monetary policies of major economies, except for Japan's central bank, have all shifted to a rate-cutting cycle, weakening the U.S. dollar's appreciation momentum. The dollar index has generally declined, decreasing by 3% since August and currently fluctuating at around 101. As the periodical divergence in monetary policies between China and foreign countries narrows, external pressures affecting the general stability of the RMB exchange rate have significantly eased. On Sept. 23, the RMB-to-U.S. dollar exchange rate reached approximately 7.05, reflecting a 2.4% appreciation since August.
The exchange rate reflects the comparative value of currencies and can be affected by multiple factors, including economic growth, monetary policy, financial markets, geopolitics and emergencies. All these elements can impact the exchange rate.
From an external perspective, uncertainties in the global environment and the U.S. dollar's trajectory persist. These are influenced by factors such as diverging economic growth among countries, geopolitical shifts, including the U.S. presidential election, and fluctuations in global financial markets.
Considering China's domestic situation, we believe the RMB exchange rate maintains a relatively stable foundation.
First, from a macroeconomic perspective, China's economic recovery and steady growth momentum are expected to further consolidate and strengthen. The strong monetary policy introduced by the PBC will support the real economy, boost consumption and enhance market confidence.
Second, China has maintained a basic equilibrium in its balance of payments. In the first half of the year, the ratio of the country's current account surplus to its GDP reached 1.1%, which is considered to be within a relatively appropriate range.
Third, the PBC and the State Administration of Foreign Exchange (SAFE) have placed great importance on the development of the foreign exchange market. This market has seen increasingly mature participants, more rational trading behaviors and significantly greater resilience. In the first half of the year, the proportion of import and export enterprises engaging in hedging reached 27%, while 30% of foreign trade in goods used RMB for cross-border settlements. These two figures don't overlap. Combined, they suggest that about 50% of Chinese enterprises involved in foreign trade and exports are relatively insulated from exchange rate risks. As the PBC has repeatedly stated, with the RMB exchange rate floating more freely, market participants should view rate fluctuations rationally. They should strengthen their "risk-neutral" philosophy and avoid speculation on exchange rate trends and unilateral movements. Enterprises should focus on their core business, while financial institutions should continue to provide sound services that support the real economy.
The PBC's stance on exchange rate policy is clear and transparent, with several key points: First, we uphold the market's decisive role in determining exchange rates while maintaining their flexibility. Second, we are strengthening efforts to guide market expectations. This includes preventing the foreign exchange market expectations from becoming unanimously one-sided and self-fulfilling. We also work to prevent exchange rate overshooting risks, maintaining the RMB's general stability within an appropriate and balanced range.
Thank you.
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CNBC:
Analysts say that the reason why the Chinese government bond yield has declined is because of expectations that the economy will slow further and that monetary policy will ease. What is the People's Bank of China's view on this, and what measures do you plan to take? Thank you.
Pan Gongsheng:
The debate surrounding this issue has subsided recently. Previously, there was extensive discussion, and the PBC communicated frequently with the market in appropriate ways. The decline in the yield of China's government bonds was attributed to various reasons. For instance, the PBC used policy interest rates to guide the market toward lowering its rates; the issuance and supply of treasury bonds slowed; and some small- and medium-sized financial institutions in the market lacked risk awareness and swarmed to the market, creating the effect of herd flock and exacerbating the situation. Currently, China's long-term treasury bonds have a yield rate of around 2.1%. This is the result of market-oriented development, and the PBC respects the market's role. At the same time, this has undoubtedly created a conducive monetary environment for implementing proactive fiscal policies.
However, we must also recognize that interest rate risk is a crucial aspect of financial institutions' risk management. The case of Silicon Valley Bank (SVB) is particularly instructive. As everyone is aware, this risk event reminds us that central banks need to observe and assess market risks from a macroprudential management perspective and take appropriate measures to mitigate and prevent risk accumulation. This is an essential responsibility of central banks.
Currently, as a key price indicator, the yield curves of government bonds still face problems such as insufficient long-end pricing and lack of stability. The central bank has issued risk warnings on the yields of long-term government bonds and strengthened communication with the market. These measures aim to prevent potential systemic risks of a one-sided decline in long-term government bond yields incurred by the effect of herd flock.
It is the central bank's responsibility to maintain a sound trading order in the bond market. Recently, the PBC identified several violations in the bond market such as price manipulation, account lending, and improper interest transfers. We will intensify investigations and penalties for violations of laws and regulations in the interbank bond market, disclosing findings to the public when appropriate. The National Association of Financial Market Institutional Investors (NAFMII) has already publicly released several cases. Ongoing investigations continue, and we will announce the results once they are completed.
In recent years, as China's financial market develop rapidly, the bond market has gradually improved in size and depth. Conditions have become increasingly suitable for the central bank to purchase and sell government bonds and issue base currency through the secondary market. I elaborated on our plans regarding this matter at the Lujiazui Forum on June 19. The PBC has already incorporated government bond purchases and sales into its monetary policy toolkit and has begun trial operations. The specific measures in this regard are fully transparent and have been published publicly on the PBC's website. We are also collaborating with the Ministry of Finance (MOF), jointly working on measures to optimize the issuance pace, maturity structure, and custody system of government bonds. The PBC's process of purchasing and selling government bonds in the secondary market will be progressive.
Thank you.
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Phoenix TV:
We've noticed that the new "National Nine Articles" for capital market regulation published this year outlined specific requirements for listed companies to improve their investment value and strengthen market capitalization management. What measures will the CSRC take next to further these efforts? Thank you.
Wu Qing:
Thank you for your questions. Listed companies are the foundation of the market. The capital market will only prosper and thrive when listed companies create value for investors and continuously provide returns. The CSRC proactively supports listed companies in improving their operation efficiency and enhancing profitability. The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) also follows an approach of offering specific policies tailored to individual enterprises and intensifying oversight of the market capitalization management of listed central state-owned enterprises (SOEs). Listed companies must improve the transparency of information disclosure, enhance standards of corporate governance, strengthen investor communication, and reward investors via various measures such as dividend distribution and share buybacks. Since the beginning of the year, more than 95% of listed companies have held performance briefings. A total of 663 announcements on mid-term dividends have been made by these listed companies, with the expected dividend payout reaching 533.7 billion yuan. Over 1,500 companies carried out share buybacks, with an aggregated value exceeding 100 billion yuan.
To improve the quality of listed companies and enhance investment value, listed companies must take their responsibilities seriously. We've worked with relevant departments to formulate guidelines for market value management of listed companies, mandating compliance in accordance with the law. First, boards of directors must prioritize investor protection and returns, strengthening the foundation of market value management through improved operations, management, profitability, and core competitiveness. Second, listed companies are required to actively use market value management tools like mergers and acquisitions, equity incentives, and major shareholder share purchase to enhance investment value. Third, listed companies must establish regular buyback mechanisms, and qualified companies are encouraged to plan and reserve capital in advance. Fourth, persistently undervalued companies must develop and publicly disclose value enhancement plans with implementation assessments, creating market constraints. Fifth, major index constituent companies must take responsibility by establishing market value management systems, clarifying responsibilities and response measures, and regularly disclosing implementation actions. It's crucial to emphasize that while strengthening market value management, listed companies and relevant parties must improve compliance awareness and avoid market manipulation, insider trading, or other illegal and irregular activities under the guise of market value management.
We'll soon seek public input on the draft guidelines for market value management. At the same time, we're collaborating with relevant ministries to establish market-based incentives and restraint mechanisms for share buybacks by listed companies. This aims to stimulate intrinsic motivation among major shareholders, senior executives and other key stakeholders, further enhancing the investment value of listed companies. Thank you.
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Cover News:
Insurance companies are important institutional investors in the capital market. Recently, the State Council issued opinions on strengthening supervision to prevent risks and promote high-quality development in the insurance industry, proposing to leverage the long-term investment advantages of insurance funds. What new measures has the NFRA taken to advance the pilot reform of long-term insurance fund investment and support participation in capital market development? Thank you.
Li Yunze:
Thank you for your question. The State Council has unveiled the "Ten Guidelines" to enhance the regulation and high-quality development of the insurance sector, providing a comprehensive and systematic strategy for the industry's advancement. China's insurance industry is ushering in a rare historic opportunity. It's likely that China's insurance market will continue to expand in the future, and the density and depth of insurance will continue to improve. Insurance capital, with its large scale, long-term nature, and stable source, naturally possesses the attribute of patient capital and will become an important value investor supporting the healthy and sustainable development of the capital market.
The capital market undoubtedly plays an important role in both financial stability and economic development. The NFRA has always attached great importance to the capital market and actively guided banks, insurance and asset management institutions to maintain its stability. Earlier, with the State Council's consent, we encouraged China Life Insurance and New China Life Insurance to carry out pilot projects, jointly establishing private equity investment funds and raising insurance funds to invest in the capital market. With a registered capital of 50 billion yuan, the fund has commenced operations and is progressing smoothly.
Going forward, we'll continue to support the sustained and sound development of the capital market. First, we'll expand the pilot reform of long-term investment of insurance funds, support other eligible insurance institutions to set up private securities investment funds, and further increase investment in the capital market. Second, we'll urge and guide insurance companies to optimize their assessment mechanisms and encourage long-term equity investments. Third, we'll encourage asset management companies and trust companies to strengthen their equity investment capacity, issue more long-term equity products, actively participate in the capital market, and cultivate and grow patient capital through multiple channels. Thank you.
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Economic Daily:
Recently, Central Huijin Investment Ltd. has significantly increased its holdings of ETFs. What does the CSRC think about this? Thank you.
Wu Qing:
Thank you for your question. The capital market is highly transparent. As we've all seen, Central Huijin Investment Ltd. has been steadily increasing its holdings of ETFs, fully reflecting state investment institutions' strong confidence in the investment value of the A-share market. This has played an important role in stabilizing the market and boosting confidence. We've noticed that many domestic and foreign investment institutions and research firms also believe that the A-share market is currently undervalued, highlighting its investment value. The CSRC will work with relevant parties to further support Central Huijin Investment Ltd.'s efforts to increase its holdings and expand its investment scope, promoting investment in the stock market by various medium- and long-term funds, including Central Huijin. Just now, Mr. Li also talked about the relevant arrangements to support the entry of insurance companies into the market. We will also actively support all types of funds, including insurance funds, to increase their market participation and provide a better policy environment. We'll further strengthen our strategic reserves and work together to promote the steady, healthy development of the capital market. Thank you.
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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.
