Financial Policy "Punch" Boosts Market Confidence

News Background:

Reducing the reserve requirement ratio and policy interest rates, lowering the interest rates on existing housing loans and unifying the minimum down payment ratio for mortgages, creating new structural monetary policy tools to support the stable development of the stock market... At the press conference held by the State Council Information Office on September 24, the People's Bank of China, the State Administration of Financial Regulation, and the China Securities Regulatory Commission announced a series of major financial policies with an intensity beyond market expectations.

Reducing the cost of funds for financial institutions and alleviating the burden of housing consumption for residents

Lowering the reserve requirement ratio by 0.5 percentage points can provide about 1 trillion yuan in long-term liquidity to the financial market. This measure will significantly reduce the cost of funds for financial institutions, release more funds into the real economy, help the development of enterprises, especially small and medium-sized enterprises, stabilize the job market, and stimulate consumer demand.

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The interest expenditure on housing loans is related to tens of millions of families and residents. The expected reduction in interest rates on existing housing loans is expected to benefit 50 million households and a population of 150 million, reducing family interest expenditure by about 150 billion yuan per year on average. This move will effectively reduce the burden of housing consumption for residents, encourage residents to convert savings into consumption and investment, boost residents' willingness and ability to consume, and help restore and expand consumption.

Innovating monetary policy tools and injecting liquidity into the capital market

The central bank announced the creation of new monetary policy tools to inject liquidity into the capital market. This is a significant advancement in the expected management and macro management of China's capital market and a strong measure to shape the capital market ecosystem. During periods of severe market fluctuations, securities companies and fund companies should play a role in stabilizing the market, but they often seem unable to cope due to fund turnover issues. The creation of swaps for securities, funds, and insurance companies is mainly to allow qualified securities, funds, and insurance companies to obtain liquidity from the central bank through asset pledge, which can greatly enhance the fund acquisition ability of these institutions and reduce their incentive to engage in short-term behavior.

Regarding the creation of special re-lending for repurchase and shareholding increase, it is mainly to guide banks to provide loans to listed companies and major shareholders for repurchasing and increasing shares. Whether affected by the macroeconomic cycle or the fluctuations of the capital market itself, when stock prices are significantly adjusted, well-founded listed companies need to take measures such as share repurchase and shareholder increase to stabilize stock prices. However, most listed companies in China lack financial arrangements and financial tools in this regard. The creation of special re-lending for repurchase and shareholding increase will fill the institutional gap and is a breakthrough measure.

Adhering to a supportive monetary policy stance and consolidating the trend of economic recovery and improvement

Finance and the real economy are interdependent, financial order and financial vitality are interrelated, and balancing development and security, as well as the changes in the domestic and foreign markets, and adjusting policies in a timely manner to fill institutional gaps, are the necessary paths to strengthen the modern financial system with Chinese characteristics. In this regard, the series of financial innovation measures introduced this time is a set of praiseworthy "combination punches".The concentrated introduction of this incremental monetary policy will further support the real economy precisely and effectively, consolidating and strengthening the momentum of China's economic recovery and improvement. In the future, the basic stability of the RMB exchange rate has a solid foundation. At present, China's economic operation is generally stable, but it still faces many difficulties and challenges. Against this backdrop, it is necessary to adhere to a supportive monetary policy stance, increase the intensity of monetary policy regulation, and improve the precision of regulation.

V Perspective:

@Wandao Zhijian: The financial policy "combination punch" exceeds expectations and imagination.

@Golden House Bookworm: The incremental funds of real gold and silver are coming.

@Wei Zhang Qi Tan: This set of monetary policy combination tools can be called an important innovation.

@Yang Tao: A good start, and cherish it as you go.

Postscript:

It should be said that the timing of this financial policy "combination punch" is just right, both exceeding expectations and being innovative, conveying a strong signal of boosting market confidence and stimulating the vitality of business entities. Coordinating the relationship between short-term and long-term, stable growth and risk prevention, internal and external, further increasing the intensity of counter-cyclical regulation, fully releasing liquidity, monetary policy will surely promote the construction of a high-quality development pattern of positive interaction between the real economy and the financial system.