The official website of the people's Bank of China issued a notice saying that in order to further promote the marketization of the rule of law "debt-for-equity swap" and increase support for small and micro enterprises, the people's Bank of China has decided that from July 5, 2018, The reserve ratio for RMB deposits of large state-owned commercial banks, joint-stock commercial banks, postal savings banks, urban commercial banks, non-county rural commercial banks and foreign banks shall be reduced by 0.5 percentage points. Five large state-owned commercial banks and 12 joint-stock commercial banks are encouraged to implement the "debt-for-equity swap" project in accordance with the principle of market-based pricing by using the funds raised from the market. We will support the implementation of "debt-for-equity swaps" to truly exercise shareholders' rights, participate in corporate governance, and promote the reform of mixed ownership. Targeted reserve reduction funds do not support "name stock real debt" and "zombie enterprises" projects. At the same time, postal savings banks, city commercial banks, non-county agricultural commercial banks and other small and medium-sized banks should mainly use the reduced funds for small and micro enterprise loans, and strive to alleviate the financing difficulties of small and micro enterprises.

The people's Bank of China will continue to implement a sound and neutral monetary policy in accordance with the unified arrangements of the CPC Central Committee and the State Council, and grasp the strength and rhythm of structural deleveraging. To create an appropriate monetary and financial environment for high-quality development and supply-side structural reform.

Relevant responsible persons of the people's Bank of China answered a reporter's question on the targeted reduction of the requirement to support the marketization of the rule of law "debt-for-equity swap" and the financing of small and micro enterprises:

1. what is the specific content of the targeted reduction to support the marketization of the rule of law "debt-for-equity swap" and the financing of small and micro enterprises?

A: there are two main aspects of this targeted reduction: first, since July 5, 2018, Five large state-owned commercial banks, including ICBC, Agricultural Bank of China, China Construction Bank and Bank of Communications, as well as 12 joint-stock commercial banks, such as CITIC Bank and Everbright Bank, were lowered by 0.5 percentage points in renminbi deposit reserve ratio, and about 500 billion yuan of funds could be released. To support the market-based rule of law "debt-for-equity" project, while leveraging the same scale of social capital participation. The relevant banks shall set up accounts, record in detail the implementation of the "debt-for-equity swap" governed by the rule of law on a market-by-market basis, and submit them to the people's Bank of China and other relevant departments on a quarterly basis. Second, at the same time, the reserve ratio for RMB deposits of postal savings banks, urban commercial banks, non-county rural commercial banks and foreign banks will be lowered by 0.5 percentage points, and about 200 billion yuan of funds can be released. It is mainly used to support the relevant banks in opening up the market for small and micro enterprises, issuing loans for small and micro enterprises, and further alleviating the problem of financing difficulties for small and micro enterprises. The use of reduced requirements funds by financial institutions to support "debt-for-equity swaps" and the financing of small and micro enterprises will be included in the macro-prudential assessment of the people's Bank of China.

2. what are the main considerations to support the marketization of "debt-for-equity swap" and small and micro enterprise financing?

A: the targeted reduction is the implementation of the relevant arrangements made at the executive meeting of the State Council on June 20. Since the beginning of this year, the amount of "debt-for-equity swap" signed by market-based rule of law and the availability of funds have been relatively slow, taking into account that large state-owned commercial banks and joint-stock commercial banks are the main force of market-based rule-of-law "debt-for-equity swap." We can release a certain amount of long-term funds with appropriate cost through targeted reduction, form positive incentives, improve its ability to implement "debt-for-equity swap", and speed up the landing of signed "debt-for-equity" projects. At the same time, at present, the problem of difficult and expensive financing for small and micro enterprises in China is still more prominent. Postal savings banks, city commercial banks and non-county agricultural commercial banks play an important role in supporting small and micro enterprises. the implementation of a targeted reduction in the requirement for small and micro enterprises is conducive to enhancing the supply capacity of small and micro credit and increasing the loan delivery of small and micro enterprises by banks. We will reduce financing costs for small and micro enterprises and improve financial services for small and micro enterprises. On the whole, this targeted reduction is conducive to steadily promoting structural deleveraging, is conducive to increasing support for small and micro enterprises and other weak links, and belongs to targeted regulation and precise regulation. The people's Bank of China will continue to implement a sound and neutral monetary policy and create an appropriate monetary and financial environment for high-quality development and supply-side structural reform.

3. what conditions should be met for the "debt-for-equity" project supported by the funds for the targeted reduction?

A: the people's Bank of China encourages 17 large and medium-sized commercial banks to use targeted rate-lowering funds and supports "debt-for-equity" projects that fully reflect the principles of marketization and the rule of law. The following are several points for attention: first, the implementing body should realize the real equity investment in the "debt-for-equity swap" project, rather than the "debt-for-debt swap" still aimed at obtaining fixed income, that is to say, Projects that do not support "real debt of famous stocks"; The second is to encourage the relevant banks and implementers to pry social funds to participate in the "debt-for-equity" project in accordance with the proportion of not less than 1:1; Third, the "debt-for-equity swap" related shares and related debt writedowns should strictly follow the market-oriented pricing, in accordance with laws and regulations, determined by the relevant participants in the project through consultation; The fourth is to support all kinds of ownership enterprises to carry out market-oriented "debt-for-equity swap", and the relevant implementing subjects should really participate in the corporate governance of enterprises after "debt-for-equity swap", promote the improvement of their corporate governance level, and promote the reform of mixed ownership at the same time; Fifth, the implementation of the "debt-for-equity swap" project should help improve the structure of enterprises' assets and liabilities, restore the momentum of enterprise development, and not support the debt-for-equity swap of "zombie enterprises."

Expert interpretation: the impact of the rate reduction on the Market

CUHK Futures Deputy General Manager / Jingchuan: nearly half a year, liquidity tightening is obvious, targeted reduction in short-term liquidity to a certain extent, the market as a whole is limited.

Jiang Xingchun, director of the Soochow Futures Research Institute: lowering the requirement in the short term can boost the market, alleviate the relatively tight capital situation, effectively hedge the economic downside risks brought about by the Sino-US trade war, appropriately reduce the financing costs of enterprises, and slightly benefit non-ferrous metals. But the medium-term trend still depends on the economic fundamentals and spot consumption performance, we tend to the overall weak shock of non-ferrous metals, after the rebound in the future will also concussion downward to seek support, it is suggested that after the introduction of more than one opportunity to leave.

Xu Maili, director of metals research at Everbright Futures: recently, the state has issued a series of policies and voices: the targeted reduction of the requirement, the improvement of the liquidity policy of small and medium-sized enterprises, and the proposal of the Politburo meeting of the Central Committee to expand domestic demand. We believe that there are two main purposes: first, the current international macro situation changes greatly and is difficult to control, the introduction of some domestic policies can play a role in hedging international macro risks; Second, so far this year, the emphasis on liquidity "from the virtual to the real" in which the "solid" effect is not obvious, it is necessary to introduce some policies to provide more support to physical enterprises. It can be said that the focus of domestic macro policy has been fine-tuned, which is undoubtedly conducive to the improvement of the real economy. In the short term, it will also help boost market confidence and benefit capital markets. However, due to the copper market fundamentals are more general, and the early foreign fund bulls have been obviously trapped, copper prices themselves rise more limited momentum, short-term may follow the surrounding market to launch a small rebound.

Zhu Yawei, a commodities expert: the cut is intended to ease market funding constraints, leave plenty of room for a trade war and benefit the stock market, but it will not have much impact on metals. The direct benefit of metals comes from the mitigation of trade wars and the advancement of supply-side reforms.

Such as Guan Qingyou, president of the Financial Research Institute: this reduction is mainly to implement the requirements of the standing Committee of the State Council, reduce the requirement, focus on supporting debt-for-equity swaps, and steadily promote deleveraging. Objectively, it releases liquidity, relieves the pressure on funds, and is conducive to improving market sentiment.

Li Daxiao, chief economist of Anglo-British Securities: this is great good news. it can release about 700 billion liquidity, solve the problem of difficult and expensive financing, and reduce the cost of financing for enterprises. In particular, it has a very positive impact on small and medium-sized enterprises, and it also plays a very important and positive role in maintaining economic stability. At the same time, at the moment of the existing Sino-US trade frictions, we can also maintain our stability, which will play a positive role in stabilizing economic growth, stabilizing the domestic economy, and stabilizing the stock market. Especially in the relatively depressed state of the market, to restore market confidence has an important role, is major good news. After the market broke through 3,000 points, investor confidence weakened, investors' mood was relatively low, and the market's general forecast was more pessimistic. the measures taken to reduce the rate at this juncture are very conducive to restoring investor sentiment and boosting investor confidence. Getting the market out of the doldrums is a big help and a timely rain. "View details

Zeng Gang, deputy director of the State Finance and Development Laboratory: structural deleveraging is the core of deleveraging this year. the key task is to leverage state-owned enterprises and local governments, but in the face of tight funding, Small and medium-sized enterprises and private enterprises have been hit, which will make the effect of structural deleveraging less obvious and may even deviate from the original intention. in this case, the implementation of a targeted rate reduction is an emphasis on the structural guidance of monetary policy itself. It fully reflects the flexibility of monetary policy, but it does not mean that monetary policy has shifted to easing. He also mentioned that from a total point of view, although this is a targeted rate reduction, in fact, all institutions are basically included, which will increase the liquidity supply of the entire market and change the relatively tight supply of funds in the real economy at present. Maintain a reasonable level of liquidity in the financial markets as a whole. "View details