SCIO briefing on financial policy package to stabilize the market and expectations

中文

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:

May 7, 2025

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 the financial policy package to stabilize the market and expectations, and answer your questions.

Now, let's give the floor to Mr. Pan for his introduction.

Pan Gongsheng:

Good morning. 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.

Since the beginning of this year, the PBC has earnestly implemented the guiding principles of the Central Economic Work Conference and the deployments of the Government Work Report. We have implemented a moderately loose monetary policy, strengthened counter-cyclical adjustments, comprehensively used various monetary policy tools, served the high-quality development of the real economy, and created a favorable monetary and financial environment for promoting the continuous recovery and improvement of the economy.

From the perspective of effectiveness, various macro-financial data has been relatively positive since the beginning of this year, and monetary credit has shown the operational characteristics of "increased quantity, decreased price and optimized structure." At the end of the first quarter, the social financing scale increased by 8.4% year on year, and loans increased by 7.4% year on year. If adjusted to include the impact of local special-purpose bonds that replaced loans from local government financing platforms, the loan growth rate would exceed 8%. The M2, a broad measure of money supply, maintained stable growth of around 7%, significantly higher than the nominal economic growth rate. At the same time, the cost of social financing remained low, and the growth rates of inclusive loans to micro and small businesses, medium- and long-term loans to the manufacturing sector, and loans to sci-tech small and medium enterprises (SMEs) were all faster than the overall loan growth rate, further optimizing the credit structure.

From the perspective of the financial market, the performance in the first quarter was positive. The stock market operated generally smoothly, trading was relatively active, and the Shanghai Composite Index remained around 3,300 points. The bond market self-corrected, driven by improved economic confidence. The onshore and offshore RMB exchange rates against the U.S. dollar appreciated slightly by about 1% compared to the end of last year, and cross-border capital flows were relatively balanced.

Since April, despite facing relatively large external shocks, the domestic financial system has remained stable, and the financial market has shown strong resilience. After the Shanghai Composite Index fell on April 7, it quickly rebounded and stabilized. Currently, the 10-year government bond yield is hovering around 1.65%, and the RMB exchange rate against the U.S. dollar depreciated slightly before rebounding to around 7.2 yuan.

Currently, the global economy is full of uncertainties. Economic fragmentation and trade tensions are intensifying, disrupting global industrial and supply chains, causing turmoil in international financial markets, and weakening global economic growth momentum. Not long ago, I attended the Spring Meetings of the World Bank Group and the International Monetary Fund (IMF) in Washington, where central bank governors and heads of international financial organizations from various countries expressed deep concern about this. The PBC will conscientiously implement the central decisions and deployments, promote high-quality economic development, unswervingly advance high-standard opening up, actively participate in international financial governance and cooperation, and maintain a rules-based international economic and financial order. At the same time, we will coordinate financial opening and security, explore and enhance the central bank's role of macro-prudential management and financial stability regime, and firmly maintain the stable operation of China's foreign exchange, bond and stock markets.

On April 25, the Political Bureau of the Communist Party of China (CPC) Central Committee held a meeting to analyze and study the current economic situation and economic work. In order to implement the guiding principles of the meeting and further implement a moderately loose monetary policy, the PBC will intensify macro regulation and introduce a package of monetary policy measures, mainly consisting of three major categories with a total of 10 specific measures.

The first category is quantitative policies, aimed at increasing medium- and long-term liquidity supply, through measures such as lowering the reserve requirement ratio, and maintaining ample market liquidity. The second category is price-based policies, which will lower policy rate, reduce the rates of structural monetary policy tools, such as the central bank's relending rates to commercial banks, and lower interest rates on provident fund loans. The third category is structural policies, which will improve existing structural monetary policy tools and create new policy tools to support such areas as technological innovation, consumption expansion and inclusive finance.

These three major categories of measures include 10 specific policies:

First, we will lower the reserve requirement ratio (RRR) by 0.5 percentage point, which is expected to provide about 1 trillion yuan in long-term liquidity to the market.

Second, we will improve the reserve requirement system by temporarily lowering the reserve requirement ratio for auto finance companies and financial leasing companies from the current 5% to 0%. 

Third, we will lower the policy rate by 0.1 percentage point, specifically reducing the seven-day reverse repo rate in the open market from the current 1.5% to 1.4%. This adjustment is expected to lead to a corresponding decrease of approximately 0.1 percentage point in the loan prime rate (LPR).

Fourth, we will reduce the interest rates of structural monetary policy tools by 0.25 percentage point. This includes various special structural tools and relending rates for supporting agriculture and small businesses, all decreasing from the current 1.75% to 1.5%. These rates represent the cost at which the central bank provides relending funds to commercial banks. The interest rates on pledged supplementary lending (PSL) will be reduced from the current 2.25% to 2%. PSL is a tool through which the central bank provides funds to policy banks.

Fifth, we will lower the interest rates on personal housing provident fund loans by 0.25 percentage point, reducing the rate for first-time homebuyers with loan terms over five years from 2.85% to 2.6%, with rates for other terms adjusted accordingly.

Sixth, we will increase the relending quota for technological innovation and technological transformation by 300 billion yuan. This will raise the total from the current 500 billion yuan to 800 billion yuan. This relending tool is already in place, and the quota has now been increased by 300 billion yuan, bringing the total to 800 billion yuan. The tool will continue to support the "two new" policies, which refer to large-scale renewal of equipment and the trading-in of consumer goods.

Seventh, we will establish a 500 billion yuan relending facility dedicated to service consumption and elderly care. This measure aims to encourage commercial banks to increase credit support for these sectors.

Eighth, we will increase the relending quota for agricultural and small businesses by 300 billion yuan. This complements our relending rate reduction, helping banks expand lending to agricultural enterprises, small and micro businesses, and private enterprises.

Ninth, we will optimize the two monetary policy tools that support the capital market. We're merging the 500 billion yuan swap facility for securities firms, funds, and insurance companies with the 300 billion yuan relending facility for stock repurchases and increased holdings, resulting in a total quota of 800 billion yuan.

Tenth, we will establish a risk-sharing tool for sci-tech innovation bonds. The central bank will provide low-cost relending funds that can be used to purchase these bonds. The central bank will collaborate with local governments and market-based credit enhancement institutions, utilizing diverse credit enhancement measures, such as joint guarantees, to share part of the default risk. This initiative aims to support the issuance of low-cost, long-term sci-tech innovation bonds for technology innovation enterprises and equity investment institutions.

These 10 specific policy measures across three major categories will be gradually disclosed on the PBC's website and implemented. Next, the PBC will continue to earnestly implement the various deployments of the CPC Central Committee and the State Council, implement a moderately loose monetary policy, and continuously adjust monetary policy based on domestic and international economic and financial conditions, as well as the operation of financial markets. We will also strengthen coordination with fiscal policy to promote high-quality economic development. Thank you.