On October 14th, the People's Bank of China released relevant financial data for the first three quarters of this year. The data shows that in the first three quarters, the increase in RMB loans in China was 16.02 trillion yuan, and the total social financing scale increased by 25.66 trillion yuan, of which the RMB loans issued to the real economy increased by 15.39 trillion yuan. By the end of September, the stock of social financing scale was 402.19 trillion yuan, a year-on-year increase of 8.0%, which is basically in line with the expected targets for economic growth and price levels. In the first three quarters, the total amount of finance in China grew steadily, providing strong and effective support for the high-quality development of the real economy.

Corporate financing costs have decreased, and business confidence continues to recover.

Since the beginning of this year, China has increased the intensity of macroeconomic regulation, implemented a prudent monetary policy that is flexible, moderate, precise, and effective, and firmly adhered to a supportive monetary policy stance. It has strengthened counter-cyclical adjustments, optimized and improved the monetary policy framework, and comprehensively used tools such as interest rates, reserve requirements, re-lending, and government bond transactions to serve the real economy, effectively prevent financial risks, and create a suitable monetary and financial environment for economic recovery and improvement. To support the recovery and improvement of the economy, the People's Bank of China has implemented three significant monetary policy adjustments in February, May, and July.

Advertisement

On September 27th, the People's Bank of China decided to reduce the reserve requirement ratio for financial institutions by 0.5 percentage points (excluding financial institutions that have already implemented a 5% reserve requirement ratio). After this reduction, the weighted average reserve requirement ratio for financial institutions is about 6.6%. On the same day, the People's Bank of China announced that in order to increase the intensity of counter-cyclical adjustments in monetary policy and support stable economic growth, starting from September 27th, the open market 7-day reverse repurchase operation interest rate was adjusted from the previous 1.70% to 1.50%. The operation interest rates for the open market 14-day reverse repurchase and temporary positive and reverse repurchase continue to be determined by adding or subtracting points on the open market 7-day reverse repurchase operation interest rate, and the amount of addition or subtraction remains unchanged.

"Our country firmly adheres to a supportive monetary policy stance, increases the intensity of monetary policy regulation, improves the precision of monetary policy regulation, and creates a good monetary and financial environment for stable economic growth and high-quality development," said Dong Ximiao, the chief researcher at China United. The People's Bank of China has made efforts in both the total amount and price this time. In terms of the total amount, this reserve requirement ratio reduction is the second reduction within the year, and it is expected to release about 1 trillion yuan of long-term liquidity; in terms of price, the policy interest rate was reduced by 20 basis points, which is the largest decrease in nearly four years.

A series of monetary policies have promoted stable growth in loans. By the end of September, the balance of domestic and foreign currency loans in China was 257.71 trillion yuan, a year-on-year increase of 7.6%, and the balance of RMB loans was 253.61 trillion yuan, a year-on-year increase of 8.1%. While the amount has increased, the loan interest rate remains at a historical low level. The weighted average interest rate for new corporate loans issued in September was 3.63%, about 21 basis points lower than the same period last year; the interest rate for new personal housing loans was 3.32%, about 2 basis points lower than the previous month, and about 78 basis points lower than the same period last year, both at historical low levels.

The strong support of financial policies has promoted the decrease in corporate financing costs, the continuous recovery of business confidence, and the improvement of investment activities. The person in charge of a petrochemical company in Huizhou said that since the beginning of this year, the cumulative effect of a series of policies has been evident, corporate financing costs continue to decline, the company's loan interest rate has dropped from 3.2% at the beginning of the year to 2.85%, and the financial cost may further decrease after this round of reserve requirement ratio reduction and interest rate reduction. The company plans to invest more resources in product research and development, market expansion, and talent introduction.

With the recent introduction of a package of incremental policies, companies that are optimistic about China's economy have started to increase investment. A garment company in Dongguan recently received an additional investment of 39 million Hong Kong dollars from its Hong Kong shareholder. The shareholder said that the increase in investment is due to recognition and confidence in China's economic development, huge market, good infrastructure and policy support, stable investment environment, and convenient production conditions. The first major petrochemical project built by a foreign-funded enterprise in Guangdong has been basically completed, and it is expected to invest an additional 10 billion yuan this year. The company's global senior vice president said that he firmly believes in China and the development prospects of the Guangdong-Hong Kong-Macao Greater Bay Area and will further expand the field of cooperation.

The credit structure continues to be optimized, and financial support for the real economy is more substantial.

Not long ago, at the World Manufacturing Conference, Wuhu United Aircraft Technology Co., Ltd. showcased innovative unmanned helicopters and other products. According to the person in charge of the company, thanks to the strong support of financial funds, the "unmanned aerial vehicle base and supporting facilities construction" project has now smoothly completed 30% of the construction progress and has been put into use in batches.This year, the People's Bank of China has focused on key links in high-quality development by establishing re-lending for technological innovation and technical transformation, increasing financial support for technological innovation and equipment updates and upgrades, and directing more credit resources to key areas and weak links in the national economy.

A medical device company in Zhuhai, supported by policies such as re-lending for technological innovation and technical transformation, quickly upgraded its factory with an output value of 30 million yuan and introduced new equipment to solve the problem of limited production capacity, laying a good foundation for the subsequent sales end to explore the market and enhance market competitiveness.

Data shows that as of the end of September, the balance of long-term loans in the manufacturing industry was 13.88 trillion yuan, a year-on-year increase of 14.8%, of which the balance of long-term loans in high-tech manufacturing industry increased by 12.0% year-on-year. The balance of loans to "specialized, refined, and innovative" enterprises was 4.26 trillion yuan, a year-on-year increase of 13.5%. The balance of inclusive small and micro loans was 32.90 trillion yuan, a year-on-year increase of 14.5%. The growth rates of the above loans are all higher than the growth rate of various loans during the same period.

"The growth rates of inclusive small and micro loans, long-term loans in the manufacturing industry, and loans to 'specialized, refined, and innovative' enterprises are all significantly higher than the growth rate of general loans. The credit structure continues to optimize, and the financial support for major strategies, key areas, and weak links continues to strengthen," said Dong Ximiao.

"In recent years, the financial sector has introduced various structural policy measures to promote the supply-side structural reform of finance, optimize financial services, and truly increase support for major strategies, key areas, and weak links. The ultimate goal of structural policies is to serve the real economy and solve key bottlenecks in the operation of the real economy," said Wen Bin, Chief Economist of China Minsheng Bank. With the gradual implementation of a package of incremental policies recently introduced, financial resources will flow more to major strategies, key areas, and weak links in the future, and the financial support for the high-quality development of the real economy will be more sufficient and brighter.

Reduce the repayment pressure on homebuyers and enhance consumption capacity

The Politburo meeting of the CPC Central Committee held on September 26 emphasized the need to respond to public concerns, adjust housing purchase restrictions, reduce the interest rates of existing housing loans, and urgently improve policies on land, finance, and finance to promote the construction of a new model of real estate development.

A few days ago, the People's Bank of China issued a notice guiding commercial banks to lower the interest rates of existing commercial personal housing loans and further improve the pricing mechanism for personal housing loan interest rates. Currently, various banks have issued specific operational matters and will implement batch adjustments before the end of October.

After the notice of the People's Bank of China to reduce the interest rates of existing personal housing loans was issued, various commercial banks successively issued conversion notices and explicitly stated the interest rate adjustment plan, giving borrowers a "reassuring pill".

On October 12, the six state-owned commercial banks including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and China Postal Savings Bank issued a notice that they will adjust the interest rates of existing housing loans in batches on October 25. According to the notice, this adjustment is aimed at commercial personal housing loans and will implement batch adjustments for the interest rates of existing housing loans (including first套房, second套房 and above).In the text, regions such as Beijing, Shanghai, and Shenzhen have higher mortgage rates for first-time home loans and all existing mortgages higher than the LPR (Loan Prime Rate) minus 30 basis points, which are uniformly adjusted to the LPR minus 30 basis points. In regions like Beijing, Shanghai, and Shenzhen, where there is currently a minimum add-on for newly issued commercial personal housing loan rates, the mortgage rates for the second and subsequent homes that are higher than the corresponding policy minimum will be uniformly adjusted to the local corresponding policy minimum.

Data shows that as of the end of July, the weighted average interest rate for all existing mortgages is approximately 4.06%. The average interest rate for new mortgages issued nationwide in the first eight months of this year is 3.61%. According to the initiative, after the batch adjustment of existing mortgage interest rates, it will be reduced to about 3.55%. After the adjustment, the interest rate will decrease by about 0.5 percentage points from the previous 4.06%, and it is expected that the decrease will be an average value, with each contract being different.

It is estimated that taking an existing mortgage of 1 million yuan, with a 25-year term and equal principal and interest repayment, assuming that the mortgage interest rate is reduced from 4.4% to 3.55%, the borrower's interest expenditure can be saved by about 5,600 yuan per year. After the batch adjustment is completed, it is expected that this policy will benefit 50 million households and a population of 150 million, saving existing mortgage households about 150 billion yuan in expenditure per year.

This year, the People's Bank of China has focused on promoting consensus among all parties to stabilize the real estate market. In May, it optimized housing credit policies, established re-lending for affordable housing, and promoted the de-stocking of existing commercial housing. In September, it further reduced the interest rates for existing mortgages and the minimum down payment ratio for mortgages, and extended the implementation period of some real estate financial policies.

"The effects of previous policies are gradually taking shape, and the real estate market has had a positive response," said Dong Ximiao. The policy of reducing existing mortgage interest rates involves multiple departments, and it is not easy for all departments to reach a consensus and promote the smooth implementation of this adjustment. This move will significantly reduce the repayment pressure on homebuyers and enhance their consumption capacity.