On September 24th, the State Council Information Office held a press conference where Pan Gongsheng, Governor of the People's Bank of China, Li Yunze, Director of the China Banking and Insurance Regulatory Commission, and Wu Qing, Chairman of the China Securities Regulatory Commission, introduced the financial support for high-quality economic development.
At the same time, a series of significant policies were introduced, covering the reduction of the reserve requirement ratio, the lowering of existing mortgage loan interest rates, and the creation of new monetary policy tools, conveying the determination to support the high-quality development of the capital market.
Affected by the good policy combination news, the A-share market welcomed a long-awaited surge on September 24th, with the Shanghai Composite Index closing up by 4.15%, the Shenzhen Component Index up by 4.36%, and the ChiNext Index, STAR 50, and Beijing Stock Exchange 50 rising by 5.54%, 3.73%, and 3.23% respectively.
Interest rate cuts and reserve requirement ratio reductions, with trillions of funds supporting the capital market.
At the press conference, Pan Gongsheng stated that in order to further support the stable growth of the economy, the People's Bank of China will firmly adhere to a supportive monetary policy stance, intensify monetary policy regulation, and improve the precision of monetary policy regulation. He also announced a series of monetary policies, including the reduction of the reserve requirement ratio and policy interest rates.
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Pan Gongsheng revealed that the reserve requirement ratio will be reduced by 0.5 percentage points in the near future, providing about 1 trillion yuan in long-term liquidity to the financial market; depending on the market liquidity conditions within this year, it may further reduce the reserve requirement ratio by 0.25-0.5 percentage points at an appropriate time.
The central bank's policy interest rate, namely the 7-day reverse repo operation interest rate, will be reduced by 0.2 percentage points, from the current 1.7% to 1.5%. At the same time, it will guide the loan market报价利率 and deposit interest rates to move down synchronously, maintaining the stability of commercial banks' net interest margins.
In terms of reducing policy interest rates, Pan Gongsheng pointed out that under the market-oriented interest rate control mechanism, the adjustment of policy interest rates will lead to the adjustment of various market benchmark interest rates. He expects that after this adjustment of policy interest rates, the medium-term lending facility (MLF) interest rate will be reduced by about 0.3 percentage points, and the expected loan market报价利率 (LPR), deposit interest rates, etc., will also move down by 0.2 to 0.25 percentage points.
The research report from Great Wall Securities analyzed that this reduction in reserve requirement ratio and interest rates is in line with market expectations. The central bank expects the policy changes to have a neutral impact on bank profits, and the net interest margin of the banking industry will remain basically stable. With the start of the Federal Reserve's interest rate reduction cycle, there is still room for further reduction in reserve requirement ratio and interest rates. Looking ahead, the fourth quarter will pay more attention to the coordination and progress of fiscal policy and special bonds.At the same time, during this press conference, it was also mentioned that for the first time, the People's Bank of China has created a structural monetary policy tool to support the capital market.
Firstly, the convenience of swaps for securities, funds, and insurance companies has been established, supporting eligible securities, funds, and insurance companies to use their bonds, stock ETFs, and Shanghai-Shenzhen 300 constituent stocks as collateral to exchange for high-liquidity assets such as government bonds and central bank bills from the central bank.
Pan Gongsheng stated that by swapping with the central bank, one can obtain high-quality, high-liquidity assets, which will greatly enhance the capital acquisition ability and stock increase ability of the relevant institutions. We plan for the first phase of the swap convenience operation to be 500 billion yuan, and the scale can be expanded in the future depending on the situation.
Secondly, a special re-lending facility for stock buybacks and increases has been created to guide banks to provide loans to listed companies and major shareholders to support stock buybacks and increases. The central bank will issue re-lending to commercial banks, with a 100% funding support ratio, and the re-lending interest rate is 1.75%. Pan Gongsheng pointed out that the first phase quota is 300 billion yuan. This tool is applicable to listed companies with different ownership structures such as state-owned enterprises, private enterprises, and mixed-ownership enterprises, and we do not distinguish between ownership structures.
The newly created monetary policy tools will better support the stable development of the stock market.
Reduce mortgage interest rates and down payment ratios to maintain the real estate market.
In addition to the new monetary policy, at the press conference, the People's Bank of China, together with the Financial Regulatory General Bureau, introduced five new policies for real estate finance.
Firstly, guide banks to reduce the interest rates on existing mortgages. The People's Bank plans to guide banks to make batch adjustments to the interest rates on existing mortgages, reducing them to near the interest rates on newly issued loans, with an expected average decrease of about 0.5 percentage points.
That is to say, according to the latest policy, for a first home, a pure commercial loan of 1 million yuan, a 30-year term, and an equal principal and interest rate reduction of 0.5%, the cumulative mortgage amount will be reduced by more than 100,000 yuan.
Pan Gongsheng stated, "Banks reducing the interest rates on existing mortgages is beneficial for further reducing the mortgage interest expenditure of borrowers. We estimate that this policy will benefit 50 million households and 150 million people, with an average annual reduction in total family interest expenditure of about 150 billion yuan. This helps to promote the expansion of consumption and investment, is also conducive to reducing the behavior of early loan repayments, and can also compress the space for illegal replacement of existing mortgage loans, protect the legitimate rights and interests of financial consumers, and maintain the stable and healthy development of the real estate market."Secondly, the minimum down payment ratio for the first and second homes' mortgages is unified, reducing the national minimum down payment ratio for second-home loans from the current 25% to 15%. In this regard, Pan Gongsheng emphasized that each local area can adopt differentiated arrangements based on the city's specific conditions and independently determine whether to implement such arrangements, as well as set the minimum down payment ratio limit within their jurisdiction. Furthermore, commercial banks, based on the risk profile and willingness of the customers, negotiate with customers to determine the specific down payment ratio levels.
Thirdly, the business property loans maturing by the end of the year and the "Financial 16 Articles" policy documents are extended from the end of this year to the end of 2026. Pan Gongsheng stated that the original two documents were due to expire at the end of this year, but together with the Financial Regulatory General Bureau, they have been extended to the end of 2026.
Fourthly, the 300 billion yuan of affordable housing re-lending created by the People's Bank of China in May, the central bank's support ratio is increased from the original 60% to 100%, enhancing the market-oriented incentives for banks and acquisition entities. Pan Gongsheng explained that this means that originally when commercial banks lent 10 billion yuan, the People's Bank of China provided 6 billion yuan, but now when commercial banks lend 10 billion yuan, the People's Bank of China provides 10 billion yuan of low-cost funds, accelerating the process of reducing the inventory of commercial housing.
Fifthly, support is provided for the acquisition of real estate companies' existing land. On the basis of using some local government special bonds for land reserves, research is being conducted to allow policy banks and commercial banks to lend support to qualified enterprises for the market-oriented acquisition of real estate company land, revitalizing the existing land and alleviating the financial pressure on real estate companies. Pan Gongsheng stated that when necessary, the People's Bank of China can also provide re-lending support. This policy is still under study with the Financial Regulatory General Bureau.
Regarding the relationship between housing price declines and monetary policy, Pan Gongsheng stated, "We mainly base our actions on our own responsibilities, supporting the risk resolution and healthy development of the real estate market from a financial perspective." However, Pan Gongsheng also cautioned that the relevant policies will be released in the near future, and the public will need to wait for a while.
In recent years, the People's Bank of China has continuously improved the macro-prudential policy for real estate finance, implementing comprehensive measures from both the supply and demand sides, repeatedly reducing the minimum down payment ratio for individual housing loans, lowering loan interest rates, canceling the lower limit of interest rate policies, and establishing affordable housing re-lending to support the acquisition of existing commercial housing, among other series of policies.
Great Wall Securities' research report analyzed that "reducing the interest rates on existing mortgages" meets the market's previous expectations, which helps to release residents' consumption capacity, boost the level of social consumption, and also helps to alleviate the pressure of some early loan repayments. "Enhancing the central bank's support capacity for affordable housing re-lending" and "studying the central bank's re-lending support for market entities to acquire real estate company land" are both continuations of the previous "stockpiling" policies, not much different from the previous related statements, indicating the determination to advance the "stockpiling" policy, and also explaining the complexity of the "stockpiling" work. Since the current real estate market fundamentals have not been significantly improved, the "stockpiling" work is still in its initial stage, and the real estate sector in the stock market may be more of a valuation rebound brought about by policies. A larger-scale trend still needs to wait for the improvement of key data such as commercial housing sales.
Regarding the multiple policies announced at this press conference, Debon Securities' research report analyzed that the incremental policies focus on supporting broad credit and the stable development of the capital market, reflecting the macro policy level's efforts to "establish first and then break" broad credit, promote the orderly relay and improvement of social credit expansion momentum, and encourage the development of long-term funds and patient capital, maintaining the stability of the capital market and promoting its healthy development.
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