SCIO briefing on actively encouraging the flow of medium- and long-term funds into the capital market and promoting its high-quality development

Securities Daily:

Last year, the central bank introduced two capital market support tools. The market has been closely following their implementation. The PBC and CSRC recently held a joint symposium. What is the latest progress on this work? Thank you.

Zou Lan:

Thank you for your question. Since 2024, the PBC has implemented multiple measures to create favorable liquidity conditions for financial markets. We have comprehensively utilized various monetary policy tools, including reserve requirement ratios (RRR), re-lending and re-discount facilities, and open market operations. We have also innovatively launched longer-term outright reverse repurchase operations to meet the banking system's liquidity needs. Last year, we reduced the statutory reserve requirement ratio twice by a total of 1 percentage point and cut the central bank's policy interest rates twice by a total of 0.3 percentage point. These were the largest adjustments in recent years. These policy measures have played an important role in ensuring stable financial market operations.

To support the stable development of the capital market, we have also introduced two innovative tools: the swap facility for securities, fund and insurance companies, and the stock buyback and increased holdings re-lending facility. Following market-oriented and law-based principles, these tools aim to enhance the financing and investment capabilities of listed companies and institutional investors. The goal is to better support these institutions in their roles in market value management and maintaining market stability, thus strengthening the intrinsic stability of the capital market. At the same time, these two tools represent an expansion and new exploration of the central bank's financial stability mandate. As Mr. Wu mentioned just now, we will also explore establishing normalized institutional frameworks. At present, both tools are being implemented smoothly, playing an important role in maintaining stable capital market operations and boosting market confidence.

Among them, the swap facility for securities, fund and insurance companies has conducted two operations, totaling 105 billion yuan. The 50 billion yuan from the October operation last year has been fully utilized for financing stock purchases and increasing holdings. The 55 billion yuan from the January operation this year is now available for industry institutions to use at any time for financing stock purchases and increasing holdings. With multi-faceted policy support, securities companies have significantly expanded their proprietary stock investment portfolios. After several months of fine-tuning, all operational processes for these tools have become fully streamlined. With ample policy space and the momentum generated by the implementation plan, both the volume of transactions and response speed are expected to improve significantly.

Loans for share repurchase and shareholding increase have been widely welcomed by the market as another tool. In order to further leverage the role of policy tools in stabilizing the capital market, the PBC has continuously optimized the policy arrangements for the re-lending for share repurchase and shareholding increase in response to market concerns. In particular, for core policy elements such as loan ratios and terms, the requirement for self-owned capital ratio when applying for loans has been reduced from 30% to 10% and the maximum loan term has been extended from 1 year to 3 years. Banks are encouraged to issue credit loans to facilitate their lending operations and fully meet the financing needs of listed companies for market value management. A few days ago, the PBC and the CSRC held a symposium, where financial institutions generally believed that listed companies that actively engage in market value management are high-quality enterprises with sound operational performance and management teams that have full confidence in their own business development. They believe that the loans for share repurchase and shareholding increase are expected to become a new business growth point for the banking industry. Financial institutions will take the implementation of policy tools as an opportunity to fully leverage their customer and branch network advantages, continuously improve comprehensive financial services for listed companies and major shareholders, and achieve joint development of banks and enterprises. As of now, financial institutions have reached cooperation intentions with nearly 800 listed companies and major shareholders. More than 300 listed companies have publicly disclosed their plans to apply for loans for share repurchase and shareholding increases, with an upper limit of more than 60 billion yuan. Among them, companies with a market value of over 10 billion yuan account for more than 40%. Loans are priced according to the principle of preferential interest rates, with an average interest rate of around 2%.

In the next stage, the PBC will work with relevant departments to continuously optimize related policies based on previous practical experience and business development, improve the convenience of tool use, and advance the expansion of coverage and scale of tools at an appropriate time. Relevant enterprises and institutions can obtain sufficient medium- and long-term funds to increase investment as needed at any time. Thank you.

Shou Xiaoli:

The last two questions.