how do you view the 9.24 major financial policy? | hotspot observation
2024-09-26
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summary
on september 24, pan gongsheng, governor of the central bank, li yunze, director of the financial supervision administration, and wu qing, chairman of the china securities regulatory commission, attended a press conference held by the state council information office to introduce the relevant situation of financial support for high-quality economic development.a number of major financial policies have been released, including a 0.5 percentage point cut in the reserve requirement ratio, a 20 basis point cut in interest rates, the creation of stock buybacks and increased re-loans, a reduction in the interest rates on existing mortgage loans, and a unified minimum down payment ratio for mortgages.after the policy was released, the market reacted very positively. on that day, the major a-share indices rose across the board, with the shanghai composite index up 4.2%, the sme board index up 4.4%, and the chinext index up 5.5%. below, we interpret the impact of these policies.
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1. increase cash flow of the household sector and boost household consumption and investment confidence
at the press conference on september 24, the central bank announced a reduction in the interest rates for existing mortgage loans and unified the minimum down payment ratio for mortgage loans. the market had previously called for the central bank to reduce the interest rates for existing mortgage loans for residents. this was mainly due toin the past two years, the interest rates of new commercial home purchase loans across the country have fallen rapidly, resulting in a large gap between the interest rates of new mortgage loans and the interest rates of existing mortgage loans.this has led to residents holding existing mortgages to tighten their belts and repay their loans in advance. taking shanghai as an example, at the beginning of 2022, the interest rate for first-home mortgages in shanghai was as high as 4.95%, while in august 2024, the interest rate for first-home mortgages in shanghai had dropped to 3.4%. at the same time, according to the monthly rmb loan data, as of august this year, new medium- and long-term loans to residents were only 1.31 trillion yuan, down about 15.6% from the same period last year.
at the meeting, pan gongsheng, governor of the central bank, announced that the interest rates on existing mortgages will be lowered and the minimum down payment ratio for mortgages will be unified. in terms of lowering mortgage rates, the interest rates on existing mortgages nationwide will be closer to the interest rates on new mortgages, with an average reduction of about 0.5 percentage points. it is expected to reduce household interest expenses by 150 billion yuan each year, benefiting 50 million households and 150 million people. in 2023, the total retail sales of consumer goods in china will be 47.15 trillion yuan. based on this, we make calculations.the interest savings that households receive each year can boost consumption by approximately 0.32 percentage points.at the same time, the impact of the decline in household interest expenses on banks as a whole is still within a controllable range. in 2023, the total revenue of 42 listed banks will be 5.65 trillion yuan, and the impact of the reduction in interest income on the overall revenue of listed banks will only be 2.65%.
more importantly,the reduction in existing mortgage interest rates is expected to revive residents' consumption and investment confidence, and confidence is an important cornerstone of a positive economic cycle.at present, there is a certain degree of "asset shortage" in the chinese economy. it is difficult for residents to find suitable investment targets. at the same time, due to the high interest rates of existing mortgage loans, early repayment has become the best investment option for residents. early repayment of loans has led to residents choosing to cut consumption, and on the other hand, it has also damaged the asset size of banks, forming a vicious cycle. therefore, the policy of lowering the interest rates of existing mortgage loans will help boost the growth of residents' consumption and investment.
in addition to lowering the interest rates on existing mortgages, the central bank also unified the minimum down payment ratio for first and second homes to 15%.lowering the down payment ratio is expected to boost household credit.according to our calculations of the new rmb loan cycle, the trend and cycle of rmb loans have both shown a downward trend since 2024, especially the new rmb loan gap (the gap is the degree of deviation between the actual value and the trend value), which has declined significantly, reaching -11.6% as of august this year, the lowest value since the global financial crisis in 2008. however, according to data from the national finance and development laboratory, china's household leverage ratio has climbed to 64%, which is significantly higher than other emerging market economies and is close to the household leverage ratio of developed countries. therefore, although the central bank's policy of reducing down payments has opened up policy space for residents to increase leverage, the actual effect of boosting credit remains to be seen.
two,reduce the financing cost of the real economy and maintain the net interest margin of banks
at the meeting, the central bank also announced two monetary policies: reserve requirement ratio cuts and interest rate cuts. at the "promoting high-quality development" series of press conferences held by the state council information office in early september, zou lan, director of the monetary policy department of the central bank, pointed out that my country's current deposit reserve ratio is around 7%, and there is still room for reserve requirement ratio cuts. therefore, the market had certain expectations for reserve requirement ratio cuts. the central bank lowered the deposit reserve ratio by 0.5 percentage points this time. the reserve ratio of large banks dropped from 8.5% to 8%, and the reserve ratio of medium-sized banks dropped from 6.5% to 6%. rural financial institutions still implement a 5% reserve ratio. after this reserve ratio cut, the average reserve ratio of the banking industry dropped to 6.6%, releasing 1 trillion yuan of long-term liquidity. governor pan also pointed out thatdownthe adjusted reserve ratio still has room to decline compared with major international economies. by the end of the year, the central bank may further reduce it by 0.25-0.5 percentage points based on actual conditions.
in addition to the reserve requirement ratio cut, the central bank also announced a 0.2 percentage point interest rate cut, and the main policy interest rate, the 7-day reverse repurchase operation rate, will drop from 1.7% to 1.5%. this policy interest rate adjustment will bring about adjustments to various market benchmark interest rates, including the mlf rate, which is expected to drop by 0.3 percentage points, and the lpr rate and deposit rate will follow suit and drop by 0.2-0.25 percentage points.
since the beginning of this year, my country's cpi year-on-year growth rate has generally fluctuated around 0, and there is a certain downward pressure on prices. therefore, the introduction of an interest rate cut policy is reasonable.in the future, if inflation does not show significant improvement, the central bank may take further measures to lower the reserve requirement ratio and interest rates.
maintaining the stability of the bank's net interest margin is one of the elements to ensure smooth transmission of monetary policy. as of the second quarter of this year, among my country's listed banks, the average net interest margin of the six major banks was 1.5%, and the average net interest margin of the 12 joint-stock commercial banks was 1.7%. since 2016, the net interest margin of my country's banking industry has shown a unilateral downward trend. the average net interest margin of the six major banks has fallen by nearly 1 percentage point, and the average net interest margin of joint-stock commercial banks has fallen by about 0.8 percentage points. according to president pan, the impact of this reserve requirement cut and interest rate cut on the bank's net interest margin remains neutral overall. lowering the interest rate on existing mortgage loans and lowering the policy interest rate will affect the return on investment on the bank's asset side, and the reserve requirement cut provides banks with low-cost long-term funds.overall, banks' net interest margin is expected to remain stable.
3. strengthen credit support for real estate enterprises and maintain the stable development of the real estate market
at the meeting,the central bank also proposed two powerful measures for the real estate market.first, the two policy documents, namely, the commercial property loans and the "16 financial measures" that are due before the end of the year, will be extended to the end of 2026. the purpose of the commercial property loans and the "16 financial measures" policies is to improve the financing situation of real estate developers and ensure the smooth operation of real estate companies. from this year's perspective, real estate development investment has not improved significantly. as of august this year, the growth rate of real estate development investment has fallen to -10.2%, and since april 2022, the growth rate of real estate development investment has maintained negative growth for 29 consecutive months. real estate companies still face liquidity and debt risks. take vanke as an example. since the beginning of this year, vanke has continuously sold high-quality assets in first-tier cities, including shanghai nanxiang impression city, shanghai qibao vanke plaza, beijing jiugong vanke plaza, shenzhen longgang vanke plaza, etc. these commercial properties are usually in good operating condition, which shows the financial pressure faced by vanke.
in addition to the extension of the above-mentioned major policy documents, the central bank also increased the funding support ratio of affordable housing refinancing from the original 60% to 100%. in may this year, the central bank created affordable housing refinancing with an amount of 300 billion yuan, guiding financial institutions to support local state-owned enterprises in purchasing completed but unsold commercial housing at reasonable prices based on market-oriented and legal principles for use as allocated or rented affordable housing. the central bank issues refinancing at 60% of the loan principal, which can theoretically drive bank loans of 500 billion yuan. however, the progress of this policy is relatively slow. as of the second quarter of this year, the balance of affordable housing refinancing was only 12.1 billion yuan, and enterprises were less willing to collect commercial housing inventory as affordable housing. in addition, the inventory and destocking cycle of commercial housing across the country are still at a high level.according to our estimates, as of august this year, my country's narrow inventory of commercial housing (area for sale) was approximately 380 million square meters, and the narrow sales cycle was approximately 5.1 months; my country's broad inventory of commercial housing (area for sale + construction area) was approximately 5.57 billion square meters, and the broad sales cycle was approximately 74.9 months.since the beginning of this year, the growth rates of both the narrow and broad sales cycles of commercial housing in my country have slowed down, but this is mainly due to the decline in the growth rate of newly started construction area of commercial housing, rather than a significant improvement in the growth rate of non-commercial housing sales.
therefore, judging from the current policy effects, the market is not willing to spontaneously purchase commodity housing inventory for affordable housing, and the central bank's increase in the support ratio from 60% to 100% this time can mitigate the acquisition risks of enterprises to a certain extent and enhance their confidence in acquisitions. from a total perspective, when the central bank's funding support ratio rises to 100%, the overall scale of bank loans leveraged will drop to 300 billion yuan, but due to the decline in bank funding costs, the policy effect of affordable housing refinancing should be improved.
overall,the policy on the real estate market at this meeting mainly depends on the central bank’s statement and the confidence it gives to the market, and is mainly focused on continuing and optimizing the policies that have been issued.
iv. boosting stock market liquidity and confidence and improving stock market mechanism construction
at the meeting on september 24,the two most important policies are the two innovative monetary policy tools established by the central bank for the stock market. this is also the first time that the central bank has used structural monetary policy tools to support the capital market.
the first tool is the securities, funds and insurance companies swap facility. qualified securities, funds and insurance companies can use their own 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. the scale of the first phase of the operation is 500 billion yuan, and the scale can be expanded in the future depending on the situation. this swap facility of the central bank can help securities companies, public funds and other institutions to convert their less liquid assets into high-quality, highly liquid assets, and promote incremental funds to enter the stock market. similar operations were used by major central banks around the world after the global financial crisis in 2008. for example, the federal reserve established various liquidity tools after the crisis to guarantee less secure and less liquid assets; the bank of japan implemented large-scale quantitative easing after the crisis, and allocated part of its funds to purchase japanese stock market etf indices, etc. it is worth noting thatthe convenient operations implemented by my country's central bank mainly involve exchanging assets for assets and do not involve an expansion of the scale of base money. this is also the main difference between the operations of my country's central bank and those of central banks in developed countries.
the second tool is stock repurchase and increase in holdings refinancing. this tool guides commercial banks to provide loans to listed companies and major shareholders for the repurchase and increase of listed company stocks. the central bank will issue refinancing to commercial banks, with a funding support ratio of 100% and a refinancing interest rate of 1.75%. the interest rate of loans issued by commercial banks to customers is around 2.25%, and the first installment is 300 billion yuan.repurchase and increase of holdings are the mainstream practices to maintain stock price stability internationally. many overseas companies have regular stock repurchase plans, which represents their confidence in their business operations.from a financial perspective, this tool can achieve the following ideal policy effects: 1) for corporate shareholders, using loans to repurchase corporate stocks at a lower price is a way to demonstrate confidence in the company's operations, which will help improve market sentiment and drive more incremental funds into the stock market; 2) for high-dividend companies, shareholders can expand their dividend scale through loan repurchases and thus make a profit; 3) for commercial banks, in the current market situation of relative "asset shortage", banks' credit funds also have an additional channel for allocation.
in addition to the creation of monetary policy tools, the statement of pan gongsheng, the governor of the central bank, also gave the market a reassurance. when mentioning the swap facility and special refinancing, governor pan said that if the two tools work well, they can continue to expand in scale. the swap facility is expected to expand to the second and third 500 billion yuan, and the special refinancing can also expand to the second and third 300 billion yuan.the central bank's support for policy continuity can greatly improve market confidence.
the stable and healthy development of the stock market is of great significance to the economy. since the beginning of this year, the overall low sentiment in the secondary stock market has also dragged down the performance of the primary market to a certain extent. as of late september, the stock market has raised a total of 227.268 billion yuan this year, which is only 23% of the same period last year. at present, my country is vigorously developing new quality productivity to promote high-quality economic development, and the equity market is a necessary infrastructure to promote new technological innovation and industrial upgrading.
v. ensure the improvement of the financing function of the financial system and enhance financial support for the real economy
large commercial banks are the main force in serving the real economy and the ballast for maintaining financial stability.however, in recent years, as banks have been increasing their efforts to reduce fees and give up profits, their net interest margins have narrowed and their profit growth has gradually slowed down, requiring them to coordinate internal and external channels to replenish capital. therefore, at the press conference, the financial regulatory bureau announced that it would increase the core tier-one capital of six large commercial banks, and that it would be implemented in an orderly manner in accordance with the idea of "coordinated promotion, phased and batched, and one policy for each bank."
at present,in my country's overall financing system, indirect financing still occupies the dominant position, which means that we need to embark on a path of science and technology finance with chinese characteristics.as early as 2020, financial asset investment companies under large commercial banks have begun to carry out equity investment pilot projects in shanghai. this move aims to encourage the development of venture capital, cultivate and expand patient capital, and further promote equity investment activities of financial asset investment companies to support the development of technological innovation enterprises. at the press conference on september 24, the financial regulatory bureau proposed that it would take the following three measures to increase support for technological innovation: first, expand the scope of pilot cities from the original shanghai to 18 large and medium-sized cities with active technological innovation, such as beijing; second, relax restrictions, appropriately relax restrictions on the amount and proportion of equity investment, increase the proportion of on-balance sheet investment from the original 4% to 10%, and increase the proportion of investment in a single private equity fund from the original 20% to 30%; third, optimize assessments, guide relevant institutions to implement due diligence exemption requirements, and establish and improve long-term, differentiated performance assessments.
(source of the title image of this article: china business network)
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author: liu xin, researcher, first financial research institute
(this article comes from china business network)
