Pan Gongsheng: Ten monetary policy measures, including RRR cuts and interest rate cuts, will be introduced

At a press conference held by the State Council Information Office today, Pan Gongsheng, Governor of the People's Bank of China (PBOC), stated that to implement the spirit of the April 25 meeting of the Political Bureau of the CPC Central Committee, further implement a moderately accommodative monetary policy, and promote high-quality economic development, the PBOC will strengthen macroeconomic regulation and introduce a package of monetary policy measures, mainly comprising three categories and ten policies:

First, quantitative policies. Through measures such as RRR cuts, the PBOC will increase the supply of medium and long-term liquidity to maintain ample market liquidity. Second, pricing policies. The PBOC will lower policy interest rates, reduce the interest rates of structural monetary policy tools, and simultaneously lower the interest rates of housing provident fund loans. Third, structural policies. The PBOC will create and intensify the implementation of structural monetary policy tools to support areas such as technological innovation, consumption expansion, and inclusive finance.

First, the reserve requirement ratio (RRR) will be lowered by 0.5 percentage points, which is expected to provide the market with approximately 1 trillion yuan in long-term liquidity.

Second, the deposit reserve system will be improved, with the RRR for auto finance companies and financial leasing companies being temporarily reduced from the current 5% to 0%.

Third, the policy interest rate will be lowered by 0.1 percentage point, meaning the interest rate for 7-day reverse repo operations in the open market will be reduced from the current 1.5% to 1.4%, which is expected to drive a synchronous decline of approximately 0.1 percentage point in the Loan Prime Rate (LPR).

Fourth, the interest rates of structural monetary policy tools will be lowered by 0.25 percentage point, including: the interest rates for various special structural tools and re-lending rates for supporting agriculture and small businesses, which will all be reduced from the current 1.75% to 1.5%; the interest rate for Pledged Supplementary Lending (PSL) will be reduced from the current 2.25% to 2%.

Fifth, the interest rates for individual housing provident fund loans will be lowered by 0.25 percentage point, with the interest rate for first-home loans with a term of over five years being reduced from 2.85% to 2.6%, and interest rates for other terms being adjusted accordingly.

Sixth, the quota for re-lending to support technological innovation and technological transformation will be increased by 300 billion yuan, from the current 500 billion yuan to 800 billion yuan, to continuously support the implementation of the program of large-scale equipment upgrades and consumer goods trade-ins.

Seventh, a 500 billion yuan "Re-lending Facility for Service Consumption and Elderly Care" will be established to guide commercial banks to increase credit support for service consumption and elderly care.

Eighth, the quota for re-lending to support agriculture and small businesses will be increased by 300 billion yuan, creating a synergistic effect with the policy of reducing interest rates for relevant tools to support banks in expanding lending to agriculture-related, small, and private enterprises.

Ninth, optimize two monetary policy tools to support the capital market by combining the 500 billion yuan quota for securities, funds, and insurance companies' swap facilities with the 300 billion yuan quota for share repurchases and shareholding increases through relending, resulting in a total quota of 800 billion yuan.

Tenth, create a risk-sharing tool for science and technology innovation bonds. The central bank will provide low-cost relending funds to purchase science and technology innovation bonds and collaborate with local governments, market-oriented credit enhancement institutions, and others to share part of the default loss risk of the bonds through diversified credit enhancement measures such as joint guarantees, thereby supporting science and technology innovation enterprises and equity investment institutions in issuing low-cost, long-term science and technology innovation bonds for financing.

Going forward, the People's Bank of China will continue to earnestly implement the various deployments of the Party Central Committee and the State Council, implement a moderately accommodative monetary policy, continuously conduct monetary policy adjustments based on domestic and overseas economic and financial conditions as well as the operation of financial markets, and strengthen coordination with fiscal policy to promote high-quality economic development.