The People's Bank of China's Three Major Easing Policies: Releasing Funds, Lowering Mortgage Rates, Injecting Capital into the Stock Market

The Governor of the People's Bank of China, Pan Gongsheng, recently announced a series of new policies aimed at promoting the stable development of the financial market. These policies include lowering the reserve requirement ratio, reducing mortgage rates, and introducing new monetary policy tools to support the stock market. These policies are also seen as the main reason behind the recent surge in the Chinese stock market.

Printing money aggressively to rescue the economy! China unveils its largest economic stimulus package since the outbreak of the pandemic, providing a short-term remedy.

People's Bank of China's Three Major Easing Policies: Strong Fund Release, Stock Market Liquidity

Promoting Market Liquidity: Lowering Reserve Requirement Ratio and Policy Interest Rate

Firstly, in order to increase market liquidity, the People's Bank of China will lower the reserve requirement ratio and policy interest rate. Specifically, the reserve requirement ratio will be lowered by 0.5 percentage points in the near term, providing approximately 1 trillion yuan of long-term liquidity to the financial market. Within this year, depending on market conditions, the reserve requirement ratio may be lowered by another 0.25 to 0.5 percentage points. At the same time, the 7-day reverse repurchase operation rate will be lowered from the current 1.7% to 1.5%, guiding loan market quoted interest rates and deposit rates to decrease simultaneously to maintain the stability of commercial banks' net interest margins.

Real Estate Market Policy: Lowering Existing Home Loan Rates and Unifying Down Payment Ratios

To further support the real estate market, the People's Bank of China will guide commercial banks to reduce existing home loan rates to be close to newly issued loan rates, with an average expected decrease of about 0.5 percentage points. In addition, the minimum down payment ratio for first and second homes across China will be unified, with the current 25% minimum down payment ratio for second homes being reduced to 15%. Furthermore, the 300 billion yuan policy for re-loans on affordable housing established in May will be optimized, with the People's Bank of China increasing the fund support ratio from the original 60% to 100% for banks. Additionally, the maturity of operating property loans and the "Financial 16 Measures" policy document, originally set to expire at the end of the year, will be extended to the end of 2026, providing longer-term stable support to the market.

Stabilizing Stock Market: Introduction of New Monetary Policy Tools

To support the stable development of the stock market, the People's Bank of China will establish new monetary policy tools. The first is to create a convenient swap facility for securities, funds, and insurance companies, supporting eligible financial institutions to obtain liquidity from the central bank through asset pledging, enhancing institutions' funding acquisition and stock holding capabilities. The second policy is to introduce special repurchase and lending for stock repurchases and holdings, encouraging banks to provide loans to listed companies and major shareholders to support stock repurchases and holdings.

Through this series of new policies, the People's Bank of China and the China Banking and Insurance Regulatory Commission hope to support the healthy development of the real estate market while stabilizing the financial market and promoting steady economic growth. These measures are expected to bring greater vitality and stability to the market, helping China achieve its goals of high-quality development.

China's economic stimulus policies have attracted attention on Wall Street; U.S. investors with holdings in China: Much cheaper than U.S. stocks! Bullish and increasing positions