• News
• 2024-05-04

Financial Policies Boost Market Confidence

The recent financial authorities have introduced a series of significant financial policies, sending out a strong signal of financial support for the stable growth and high-quality development of the economy. With the support of a series of existing and incremental policies, social expectations have improved significantly, and market confidence has been greatly enhanced.

Since the beginning of this year, China's economic operation has been generally stable and progressive, but some new situations and problems have also emerged. The Politburo meeting of the CPC Central Committee held on September 26 emphasized the need to focus on key points, take the initiative, effectively implement existing policies, and introduce incremental policies to further improve the targeted and effective nature of policy measures.

On September 27, the People's Bank of China announced that from the 27th, the reserve requirement ratio for financial institutions would be reduced by 0.5 percentage points (excluding financial institutions that have already implemented a 5% reserve requirement ratio). After this adjustment, the weighted average reserve requirement ratio for financial institutions is about 6.6%. On the same day, the People's Bank of China issued an announcement to adjust the 7-day reverse repurchase operation interest rate from 1.7% to 1.5%, a decrease of 20 basis points.

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"Our country adheres to a supportive monetary policy stance, increases the intensity of monetary policy regulation, improves the precision of monetary policy regulation, and creates a good monetary financial environment for the stable growth and high-quality development of the economy," said Dong Ximiao, chief researcher at China United. The People's Bank of China has made efforts in both total amount and price this time. In terms of the total amount, this reserve requirement ratio reduction is the second reduction this year, and it is expected to release about 1 trillion yuan of long-term liquidity; in terms of price, the policy interest rate was reduced by 20 basis points, which is the largest decrease in nearly four years.

"The intensity of reserve requirement ratio reduction and interest rate reduction is large, and the measures are timely," said Ye Yindan, a researcher at the Bank of China Research Institute. The reserve requirement ratio reduction will provide long-term low-cost funds for the banking system, enhancing the motivation and sustainability of banks to serve the real economy. Under the market-oriented interest rate regulation mechanism, the reduction of policy interest rates will lead to a decrease in various market benchmark interest rates, promoting the reduction of corporate financing costs, expanding domestic demand, and releasing consumption and investment potential.

The implementation of monetary policy has been intensified, providing strong support for credit growth. "The People's Bank of China's 0.5 percentage point reserve requirement ratio reduction this time will further release more long-term funds and optimize the structure of bank funds. Next, our bank will focus on serving the real economy, focus on doing well in the 'five major articles', accurately grasp the direction of business development, and continue to increase the allocation of funds to key areas and weak links," said a person in charge of the Ningbo branch of the Bank of Communications.

Guide banks to reduce the interest rates of existing housing loans, unify the minimum down payment ratio of housing loans, extend the term of two real estate financial policy documents, optimize the policy of re-lending for affordable housing, and support the acquisition of existing land by real estate companies... Recently, the financial authorities have announced five financial policies related to the real estate market, aiming to promote the stable and healthy development of the real estate market.

Both the supply and demand sides are working together to improve real estate financial policies. From the perspective of demand, the People's Bank of China guides commercial banks to reduce the interest rates of existing housing loans to the vicinity of newly issued loans, and it is expected that the average decrease will be about 0.5 percentage points; the minimum down payment ratio for the first and second homes at the national level is unified to 15%, better supporting the rigid and diversified improvement of housing needs for residents and families.

Mr. Zhang, who lives in Qingdao, Shandong Province, has recently been paying attention to improving housing. "The current house is a bit small, and I want to buy a three-bedroom house near the child's school," said Mr. Zhang. The policy of reducing the interest rates of existing housing loans and the minimum down payment ratio is a great benefit for their family.Data shows that as of the end of June, the balance of personal housing loans in our country was 37.79 trillion yuan. The decline in the interest rate of existing housing loans will effectively reduce the monthly burden for residents who have purchased homes, and it is expected to benefit 50 million households and 150 million people, saving approximately 150 billion yuan in family interest expenses per year on average.

"Reducing the interest rate on existing housing loans will decrease the interest expenses of borrowers, alleviate the repayment pressure on borrowers, enable them to increase other consumption expenditures, and reduce the behavior of repaying loans in advance," said Dong Ximiao.

Financial regulatory authorities have also introduced many favorable policies and measures for the supply side. For example, the People's Bank of China and the State Financial Regulatory Administration decided to extend the phased policies such as loans for operating properties until the end of 2026, which will help further activate the existing assets of real estate companies, improve the cash flow of real estate companies, and promote a virtuous cycle between finance and real estate.

As early as April, the Shanghai headquarters of the People's Bank of China and the Shanghai Regulatory Bureau of the State Financial Regulatory Administration organized a concentrated signing meeting for loans for operating properties in Shanghai. Eight major commercial banks and 12 real estate companies participated in the meeting, with a signed loan amount of 14.6 billion yuan. The extension of the policy for loans for operating properties will continue to strongly support the financing of private real estate companies.

"The additional real estate financial policies in this round have not changed the consistent policy direction, and the connection between new and old policies is steady and orderly," said Wen Bin, Chief Economist of China Minsheng Bank. The increased support from financial policies sends a clear signal of stabilizing the real estate market.