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interface news reporter | yang zhijin

interface news editor | jiang yiman

the state council information office held a press conference on september 24, and the heads of the central bank, bureau and commission appeared on the same stage again after many years. the press conference announced a number of major policies, including lowering the reserve requirement ratio and interest rates, and reducing the interest rates on existing mortgage loans. the structural monetary policy was also further innovated to support the stock market and the property market.

for example, the central bank will create a swap facility for securities, funds and insurance companies and a special re-loan for stock repurchase and increase holdings. the first batch of quotas for the two will total 800 billion yuan, and the subsequent quotas may be further increased to guide funds to the stock market. affected by the two tools and other measures, a-shares rose sharply on september 24, and the shanghai composite index rose 4.15% to 2863.13 points.

in terms of real estate, the central bank may set up relevant re-loans to support policy banks and commercial banks in lending to real estate companies to acquire land; in addition, the proportion of the people's bank of china's contribution in the affordable housing re-loan policy will be increased from the original 60% to 100%. the above two structural monetary policies combined with other real estate policies will help stabilize the real estate market.

data from the central bank show that as of the end of june this year, there were 18 structural monetary policy tools with a balance of 7 trillion yuan. after the creation of new tools, the number of structural monetary policy tools will increase and the balance will further increase.

swap facilities will not release base money

at the press conference, pan gongsheng, the governor of the central bank, announced the creation of new monetary policy tools to support the stable development of the stock market. the first is to create a swap facility for securities, funds and insurance companies, and the second is to create special re-loans for stock repurchases and share purchases. "this is also the first time that the people's bank of china has innovated structural monetary policy tools to support the capital market," pan gongsheng said.

according to pan gongsheng, the securities, funds and insurance companies swap facility supports eligible securities, funds and insurance companies to obtain liquidity from the central bank through asset pledge. specifically, the aforementioned institutions can use their bonds, stock etfs, csi 300 constituent stocks and other assets as collateral to exchange for high-liquidity assets such as government bonds and central bank bills from the central bank.

"compared with other assets held by market institutions, government bonds, central bank bills have great differences in credit rating and liquidity. many institutions have assets, but sometimes the liquidity is relatively poor. by exchanging with the central bank, they can obtain relatively high-quality and high-liquidity assets, which will greatly enhance the relevant institutions' ability to obtain funds and increase stock holdings." pan gongsheng said.

considering the current low scale of central bank bills, the high-liquidity assets that securities, funds and insurance companies can exchange for are mainly government bonds. according to the central bank's balance sheet, the central bank held more than 2 trillion yuan of government bonds at the end of august, which may increase further in the future, while the balance of central bank bills in the market is only 155 billion yuan.

regarding the quota of this tool, pan gongsheng said: "we plan to have an initial operation scale of 500 billion yuan for the swap facility, and we can expand the scale in the future depending on the situation. as long as this is done well, we can get another 500 billion yuan for the first phase, or even a third 500 billion yuan. i think it is all possible and open. the funds obtained through this tool can only be used to invest in the stock market."

there is a lot of experience with similar swap tools at home and abroad. for example, the federal reserve launched the term securities lending facility (tslf) during the 2008 financial crisis, allowing primary dealers to use less liquid securities as collateral to borrow more liquid treasury bonds from the federal reserve, facilitating financing in the market and boosting the market. it was used again during the 2020 epidemic. the people's bank of china launched the central bank bill swap (cbs tool) in 2019, allowing primary dealers to exchange bank perpetual bonds for central bank bills from the central bank, improving the liquidity of commercial bank perpetual bonds and helping banks issue perpetual bonds to supplement capital.

similar to the cbs tool, the securities, fund and insurance company swap facility will not expand the scale of base money. the reason is that the securities, fund and insurance company swap facility adopts the method of "bond-for-bond" and does not directly provide funds to non-bank institutions, so it will not inject base money.

wen bin, chief economist of china minsheng bank, said that securities, funds and insurance companies can adjust their stock holdings more flexibly by using swap facilities, especially in the downward range of stock prices. some poorly performing stocks have poor liquidity. securities, funds and insurance companies can use swap facilities to reduce the additional costs incurred when adjusting positions, and more conveniently obtain the funds needed for position adjustments. at the same time, purchasing low-priced stocks again after the swap is completed will also help reduce the overall holding cost.

"therefore, it is expected that swap facilities will be more popular when the stock market is sluggish, which will help securities, funds and insurance companies to obtain funds in a timely manner to adjust their positions and increase their holdings, thereby promoting market stabilization and recovery." wen bin said.

use the "loan first, borrow later" model

the special re-loan for stock repurchase and increase holdings is not a loan directly from the central bank to enterprises. instead, it guides 21 national banks through an incentive-compatible mechanism to issue preferential interest rate loans to eligible listed companies and major shareholders for the repurchase and increase of stock holdings, on the premise of making independent decisions and assuming their own risks.

specifically, the central bank will issue re-loans to commercial banks, providing a funding support ratio of 100%, a re-loan interest rate of 1.75%, and the loan interest rate issued by commercial banks to customers is around 2.25%.

according to a reporter from interface news, the interest rate of this re-loan is the same as the current main re-loan rate, and the expected term is also one year, but the central bank has not yet made it clear whether this re-loan can be extended.

like previous re-loans, this tool will also use the "lending first, borrowing later" model, that is, financial institutions will independently lend to enterprises and manage ledgers in accordance with market-oriented and rule-of-law principles, and then apply to the central bank for re-loans or incentive funds, which will be conducive to achieving precise re-loan support for related fields.

"the initial quota is 300 billion yuan. if this tool is used well, we can get another 300 billion yuan, or even a third 300 billion yuan. all are possible. this tool is applicable to listed companies of different ownership structures, such as state-owned enterprises, private enterprises, and mixed-ownership enterprises. we do not distinguish between ownership structures," said pan gongsheng.

wen bin said: "special re-loans for stock repurchases and shareholding increases" may be a traditional form of structural monetary policy tools, which will provide long-term funds for the stock market, support the coordination of investment and financing functions of the capital market, and help maintain the stability of the capital market.

re-lending may support the acquisition of real estate companies' existing land

in addition, there are new moves in the structural monetary policy to support the property market. prior to this, structural monetary policy tools to support the real estate market have been created one after another, including the guaranteed housing loan support plan, the special re-loan for real estate companies to relieve difficulties, and the re-loan for affordable housing. the balances at the end of june this year were 14.1 billion yuan, 20.9 billion yuan, and 12.1 billion yuan, respectively.

among them, the affordable housing refinancing was created in june 2024. the refinancing targets 21 national financial institutions to support local state-owned enterprises to purchase completed but unsold commercial housing at reasonable prices for use as affordable housing. for loans that meet the requirements, the central bank will provide low-cost funding support at 60% of the loan principal. the refinancing interest rate is 1.75%, the term is 1 year, and it can be extended 4 times.

"we have increased the proportion of the people's bank of china's investment in the affordable housing re-lending policy from 60% to 100%. previously, commercial banks lent 10 billion yuan and the people's bank of china provided 6 billion yuan. now, commercial banks lend 10 billion yuan and the people's bank of china provides 10 billion yuan in low-cost funds," pan gongsheng said at the press conference.

the increase in the support ratio will help enhance market-based incentives for banks and acquisition entities and accelerate the process of destocking commercial housing.

in addition, pan gongsheng also introduced that the central bank will support the acquisition of real estate companies' stock of land. on the basis of using some local government special bonds for land reserves, it is studied to allow policy banks and commercial banks to lend to support qualified enterprises to purchase real estate companies' land in a market-oriented manner, revitalize stock of land, and ease the financial pressure of real estate companies. when necessary, the people's bank of china can also provide re-lending support.

"this is a big breakthrough. in the past, regulators repeatedly emphasized that loans must not enter the real estate land market in any form, but now the door has been opened. although the land market is sluggish now, it is still feasible for local municipal investment companies to use this policy to revitalize the existing land in the region." said the head of the fixed income research department of a shanghai brokerage firm.