China National Radio (CNR):
Mr Liu, as the deputy governor of the People's Bank of China (PBOC), would you please introduce what monetary credit the central bank has issued to support the prevention and control efforts involving the entire nation in fighting against the epidemic and what kind of monetary policies will be rolled out in the next phrase? Thank you, Mr. Liu.
Thank you for your question. Your concern is a very important issue. Regarding the running of the economy and market in a special time during the epidemic, the PBOC has made all-out efforts to support the control work with timely responses and quick actions. The major targeted measures that we have taken for the resumption of work and production are as follows:
First, was to increase the role of reverse repurchases in the open market. The reserve repo, the successful rate of the medium-term lending facility (MLF), and the prices offered in the loan market, have fallen by 10 basis points respectively, fueling an overall decline of interest rates in the domestic market. The adjustments have played a decisive role in maintaining the liquidity of the stock market which opened after the seven-day Spring Festival holiday and stabilized the financial market. So far, short-term liquidity has been almost entirely soaked up and the liquidity of banks has remained ample and within an appropriate range.
Second, was to allocate 300 billion yuan ($42.8 billion) in a refinancing program targeted at offering low-cost loans. In addition to the national banks, local corporate banks in 10 major provinces and cities, including Hubei province, will be financed before offering targeted loans to enterprises directly involved in the fight against the epidemic. The loans totaling 300 billion yuan will be allocated to nine national banks and those from the aforementioned regions to finance producers engaged in making commodities that fight the epidemic, such as face masks, protective suits and disinfectant. These enterprises, focusing on producing suits for medical staff or providing transportation services, have registered on our list, meaning they are entitled to be financed by the loans that the banks have borrowed from us. Both of the quantitative and structural approaches adopted are measures we have taken to maintain market stability and help claim the final victory against the virus. By Feb. 25, a total of 1,008 enterprises have been financed by the loans at an actual rate of 1.28%, which was lower than the requirement of no more than 1.6% stipulated by the State Council, due to the fiscal subsidies. The 7-day interbank repo rate has been kept around 2.2 %, indicating the market remains stable despite some fluctuations in the stock and exchange markets. The policies and measures we have launched have proved to be positive.
Going forward, we will make our sound monetary policies more resilient and appropriate to prioritize the recovery and development of the real economy. These policies, achieved by stabilizing market expectations, increasing aggregated quantities, overseeing precise categorizations, highlighting loan extensions, creating financial tools and focusing on implementation, will continue to help fight the epidemic and support the real economy. We will take every possible measure to offset the impact caused by the epidemic on our economy and strive to reach the socio-economic development goals set for this year. First, we will make a good use of existing policies, ensuring that the policies, such as targeted refinancing, can continue to be applied to support the development of small-and-medium sized banks. By applying the monetary policy tools, such as the medium-term lending facility (MLF), open market operations (OMO), and standing lending facility (SLF), we are waiting for the right timing to launch last year's dynamic evaluations on the targeted cuts to required reserve ratios directed by the principle of financial inclusion to release long-term liquidity. Since some banks have already met the standards centered on financial inclusion, they are able to lower the level of their required reserve ratios and be stimulated to keep on improving their services in this regard. In addition, we will continue to advance reforms of the loan prime rate (LPR) to lead in a downward trend for both market and loan interest rates.
Second, we will carry out new policies and measures at an appropriate time to support the resumption of work and production. We will increase the rediscount and refinancing amounts to encourage banks to issue loans at preferential rates to micro and small-sized enterprises to help them resume work and production according to different categories. The financial institutions are driven to support these businesses by facilitating their access to loans. The banks are motivated to adopt more approaches and develop more tools to increase capital supplement. We have financed the banks with a considerable amount of funds at a low cost, which has greatly released the liquidity of small and medium-sized banks and lowered liquidity costs. However, to issue loans to enterprises, banks remained challenged by their limited capital. As the demand for loans issued from banks increases, we will design more preferential policies in the next phase to expand the funds in small and medium-sized banks to strengthen the banking system's capabilities in issuing credits and loans and to continue to a boost the real economy.