Financial Sector Voices: Accelerating Implementation of Incremental Policies

The 2024 Financial Street Forum Annual Conference was held in Beijing's Financial Street from October 18th to 20th. Known as the "barometer of China's financial reform and development," the forum saw a flurry of speeches from financial authorities such as the People's Bank of China, the State Financial Regulatory Administration, the China Securities Regulatory Commission (CSRC), and the State Administration of Foreign Exchange, signaling support for stable economic growth and the intensification of monetary and financial policies.

Looking ahead, monetary policy will increase counter-cyclical adjustments, with the Loan Prime Rate (LPR) expected to continue to decline. It is anticipated that the reserve requirement ratio may be further reduced before the end of the year. Concurrently, a series of policy measures are being accelerated to serve high-quality economic development, stabilize the capital and real estate markets, and expand high-level financial openness.

To support the continuous recovery and improvement of the economy, the monetary policy remains committed to a supportive stance, increasing counter-cyclical adjustments. At the opening ceremony of the annual conference, People's Bank of China Governor Pan Gongsheng stated that in terms of reserve requirement ratio and interest rate cuts, on September 27th, the reserve requirement ratio was reduced by 0.5 percentage points, and it is expected that before the end of the year, depending on market liquidity, the reserve requirement ratio may be further reduced by 0.25 to 0.5 percentage points; the interest rate for the 7-day reverse repo operation in the open market was reduced by 0.2 percentage points; the medium-term lending facility rate was lowered by 0.3 percentage points, from 2.3% to 2%. On the morning of October 18th, major commercial banks have announced a reduction in deposit interest rates. Pan Gongsheng also forecasted that the LPR to be announced on October 21st would also decrease by 0.2 to 0.25 percentage points.

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In the view of industry insiders, this will further support the development of the real economy. "The reduction in the LPR quote is in line with the current macro policy direction and is a key link in transmitting the central bank's 'forceful interest rate cuts' to the real economy," said Wang Qing, Chief Macro Analyst at Orient Gold Honesty. It is expected that after the LPR quote is reduced in October, it will lead to a more significant reduction in corporate and residential loan interest rates, thereby stimulating the financing demand of the real economy and providing important support for the successful completion of the annual economic and social development goals and tasks.

To serve high-quality development and focus on key areas and weak links in the real economy, financial support policies will continue to exert effort. Regarding support for the field of scientific and technological innovation, CSRC Chairman Wu Qing stated that the CSRC will focus on cultivating and expanding patient capital, comprehensively using various tools such as stocks, bonds, and futures, improving the support policies for venture capital and private equity investment "raising, investing, managing, and exiting," and guiding better investment in early-stage, small-scale, long-term, and hard-tech ventures.

At the end of September, the State Financial Regulatory Administration had just issued the "Notice on Doing a Good Job in the Equity Investment Expansion Pilot Work of Financial Asset Investment Companies," expanding the pilot scope from Shanghai to 18 large and medium-sized cities. Li Yunze, Director of the State Financial Regulatory Administration, also stated that financial asset investment companies are encouraged to play a greater role in supporting scientific and technological innovation. "The intended fund size for the new batch of 18 pilot cities has exceeded 250 billion yuan," he said.

It is worth noting that in response to some prominent contradictions and challenges in the operation of the economy, especially in the real estate and capital markets, monetary and financial policies are even more "targeted," continuously introducing new tools and measures. According to the signals released by the responsible person's speech, there are new developments in these areas.

Previously, the People's Bank of China, together with the CSRC, formulated two tools to help support the stable development of the capital market. According to Pan Gongsheng, the securities, fund, and insurance company swap convenience (hereinafter referred to as "swap convenience") has begun to accept applications from financial institutions, and the policy documents for stock repurchase and increase in special re-lending were officially released and implemented on October 18th. Wu Qing also said that the CSRC has approved the participation of 20 securities and fund companies in the swap convenience and will actively cooperate with the People's Bank of China to implement the policy tools for stock repurchase and increase in re-lending, which will introduce incremental funds to the A-share market. Pan Gongsheng also revealed, "We will cooperate with the CSRC to gradually improve and explore a normalized institutional arrangement in practice."

Li Yunze also stated that support will be given to qualified insurance institutions to establish new private securities investment funds and increase the stability of the market.

From the signals released by the annual conference, a batch of new policies are also on the way to promote high-level opening up to the outside world. Zhu He, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, stated that the State Administration of Foreign Exchange will focus on high-level opening up and strive to improve the quality of capital project opening. He revealed that a medium-term reform plan for foreign direct investment (FDI) foreign exchange facilitation is being studied and formulated; the interconnection of financial markets will be steadily promoted; and the reform of cross-border financing management will be deepened."We have officially approved the establishment of a property insurance company in Beijing by the French Paris Insurance Group in conjunction with the German Volkswagen Financial Services Overseas Company, and have also approved the establishment of an insurance asset management company in Beijing by the American Prudential Insurance Company. Next, we will continue to support Beijing in expanding the opening up of its financial sector, contributing more financial strength to the high-quality economic and social development of the capital," said Li Yunze.