Overview of ten monetary policy measures such as Central Bank's reserve requirement ratio cut and interest rate reduction

Source: State Council Information Office

On May 7th at 9:00, the State Council Information Office will hold a press conference where officials from the People's Bank of China, the National Financial Supervision and Administration, and the China Securities Regulatory Commission will introduce the relevant situation regarding the "package of financial policies to support market stability and expectations."

Pan Gongsheng, the governor of the People's Bank of China, stated that to implement the spirit of the Central Political Bureau meeting on April 25 and to further carry out a moderately accommodative monetary policy to promote high-quality economic development, the People's Bank will intensify macro-control efforts and introduce a package of monetary policy measures.

There are mainly three types of policies: First, quantity-type policies, which increase medium and long-term liquidity supply through measures such as reserve requirement ratio cuts, to maintain ample market liquidity. Second, price-type policies, which lower policy interest rates, reduce the interest rates of structural monetary policy tools, and at the same time lower the interest rates for provident fund loans. Third, structural policies, which create and strengthen the implementation of structural monetary policy tools to support technological innovation, expand consumption, and promote inclusive finance.

The top ten measures are as follows:

First, reducing the reserve requirement ratio by 0.5 percentage points is expected to provide approximately 1 trillion yuan in long-term liquidity to the market.

Second, improve the deposit reserve system and gradually reduce the deposit reserve ratio of automotive finance companies and financial leasing companies from the current 5% to 0%.

Third, the policy interest rate is lowered by 0.1 percentage points, that is, the open market 7-day reverse repurchase rate is reduced from the current 1.5% to 1.4%, which is expected to drive the Loan Prime Rate (LPR) down by about 0.1 percentage points.

Fourth, the interest rates of structural monetary policy tools are lowered by 0.25 percentage points, including: the interest rates of various special structural tools and the interest rate for re-lending to agriculture and small enterprises, both of which are reduced from the current 1.75% to 1.5%; the interest rate for pledged supplementary loans (PSL) is reduced from the current 2.25% to 2%.

Fifth, reduce the personal housing provident fund loan interest rate by 0.25 percentage points, with the interest rate for first-time homebuyers with a term of more than five years reduced from 2.85% to 2.6%, and the interest rates for other terms adjusted simultaneously. #一揽子金融政策支持稳市场稳预期#

Sixth, increase the re-lending quota for technological innovation and technological transformation by 300 billion yuan, raising it from the current 500 billion yuan to 800 billion yuan, to continue supporting the implementation of the "Two New" policy.

Seventh, establish a 500 billion yuan "Service Consumption and Pension Re-loan" to guide commercial banks in increasing their credit support for service consumption and pensions.

Eighth, increase the re-lending quota for supporting agriculture and small enterprises by 300 billion yuan, forming a synergistic effect with the policy of lowering relevant tool interest rates to support banks in expanding loans to agricultural, small, and private enterprises.

Ninth, optimize two monetary policy tools that support the capital market, combining the 500 billion yuan facility for securities, fund, and insurance company swaps with the 300 billion yuan increase in stock repurchase loans for a total quota of 800 billion yuan.

Tenth, establish risk-sharing tools for technology innovation bonds, with the central bank providing low-cost re-lending funds that can be used to purchase technology innovation bonds. Collaborate with local governments, market-oriented credit enhancement institutions, etc., to share part of the default loss risk of the bonds through diversified credit enhancement measures such as joint guarantees, thereby supporting technology innovation enterprises and equity investment institutions in issuing low-cost, long-term technology innovation bond financing.

In the next step, the People's Bank will continue to earnestly implement the various deployments of the Central Committee of the Party and the State Council, effectively carry out a moderately accommodative monetary policy, continuously manage monetary policy adjustments based on domestic and international economic and financial conditions as well as the operation of financial markets, and strengthen the coordination and cooperation with fiscal policy to promote high-quality economic development.