On October 18, 2024, the Financial Street Forum Annual Meeting opened. Pan Gongsheng, Governor of the People's Bank of China, Li Yunze, Director of the China Banking and Insurance Regulatory Commission, Wu Qing, Chairman of the China Securities Regulatory Commission, and Zhu Hexin, Vice Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, delivered important speeches.

Pan Gongsheng, Governor of the People's Bank of China

Pan Gongsheng, Governor of the People's Bank of China, delivered a keynote speech titled "Strikethe Right Balance and PursueHigh-Quality Development of the Chinese Economy" at the 2024 Financial Street Forum Annual Meeting.

Pan Gongsheng stated that the day before yesterday, a meeting was held with the China Banking and Insurance Regulatory Commission to deploy policies to support stable growth for financial institutions.

Pan Gongsheng pointed out that two policy tools to support the stable development of the capital markets have been set up. A special team has been established, and the documents for stock buybacks, increased holdings, and special re-lending were officially released today. He emphasized that the two tools to support the stable development of the capital markets are entirely based on market principles, facilitating exchanges without directly providing financial support from the central bank. The central bank's provision of stock buybacks, increased lending will have specific directions; credit funds entering the stock market illegally is a bottom line.

Pan Gongsheng stated that it is expected that by the end of the year, depending on market liquidity conditions, the deposit reserve ratio will be further reduced by 0.25-0.5 percentage points at an opportune time. It is also anticipated that the Loan Prime Rate (LPR) announced on the 21st will decrease by 0.2-0.25 percentage points.

Pan Gongsheng said that the Chinese economy has undergone profound structural adjustments and dynamic balance. In the future, it is necessary to maintain three key balances: the balance between economic growth rate and quality, the balance between domestic and external economies, and the dynamic balance between investment and consumption.

Pan Gongsheng stated that the monetary policy framework will be further improved. In terms of the target system, promoting a reasonable increase in prices will be an important consideration, with more emphasis on the role of price-based control tools such as interest rates. In terms of the execution mechanism, the toolbox of monetary policy will continue to be enriched, the role of structural monetary policy tools will be well implemented, and the trading of government bonds will gradually increase in open market operations. The People's Bank of China has established a joint working group with the Ministry of Finance to continuously optimize relevant institutional arrangements. In terms of the transmission mechanism, it is necessary to continually enhance the transparency of monetary policy, improve the autonomous rational pricing ability of financial institutions, strengthen the consistency with fiscal, industrial, regulatory, and other policy orientations, and further enhance the efficiency of monetary policy transmission.

At 10:30 Beijing time, the People's Bank of China announced the official launch of the Securities, Fund, Insurance Companies Interchange Facility (SFISF) operation. The central bank stated that there are currently 20 securities and fund companies approved to participate in the interchange facility operation, with the initial application quota exceeding 200 billion yuan.

The central bank emphasizes that funds obtained through this tool can only be invested in the capital markets for stocks, stock ETF investments, and market-making.

The People's Bank of China entrusted a specific market business primary dealer (ChinaBond Credit Increase Corporation) to conduct swap transactions with securities, funds, and insurance companies that meet the conditions set by industry regulatory authorities. The swap term is 1 year, extendable as needed. The swap rate is determined by bidding from participating institutions. Eligible collaterals include bonds, stock ETFs, components of the csi 300 index, and public REITs, with discount rates set based on the risk characteristics of the collateral. Funds obtained through this tool can only be invested in the capital markets for stock, stock ETF investments, and market making.

According to Xinhua Finance, some industry experts told reporters that the interchange facility can significantly enhance the financing capacity of non-bank institutions, continuously bringing incremental funds to the stock market. Specifically, participating institutions will swap illiquid bonds and stocks for national bonds and treasury bills through the interchange facility. The latter, as high-grade liquid assets, can significantly improve the availability of repurchase financing, and the funds obtained will be used for stock, stock ETF investments, and market-making. Some state-owned large banks have expressed willingness to facilitate related repurchase financing under the interchange facility, relaxing the credit limit requirements for participating institutions in repurchase financing. The 200 billion yuan quota applied by institutions is essentially a credit granted by the central bank, representing potential incremental funds. Institutions will not use it all at once and will continue to bring incremental funds to the capital markets.

In addition, the central bank announced the official launch of the stock repurchase increase and lending rediscount. The central bank stated that 21 national financial institutions are now able to issue relevant loans to eligible listed companies and major shareholders, and in the first month of the next quarter, apply for rediscount from the People's Bank of China. For qualified loans, the People's Bank of China provides rediscount support based on 100% of the loan principal. The initial quota for rediscount is 300 billion yuan, with an interest rate of 1.75%, a term of 1 year, extendable as needed, with a total estimated term of up to 3 years.

In a notice jointly released by the central bank, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission regarding the establishment of stock repurchase increase and lending rediscount, it was pointed out that the 21 financial institutions autonomously decide whether to issue loans, reasonably determine loan conditions, bear their own risks, and the loan interest rate should not exceed 2.25% in principle. The loan funds are to be used exclusively for specific purposes in a closed operation.

Financial institutions that issue stock repurchase increase loans in accordance with the notice provided by the 21 financial institutions are exempt from executing relevant regulatory provisions such as 'credit funds must not flow into the stock market'; for credit funds beyond the exemption, existing regulatory provisions will be followed. Stock repurchase increase and lending rediscount will be issued quarterly.

Chairman Li Yunze of the China Banking and Insurance Regulatory Commission:

Chairman Li Yunze of the China Banking and Insurance Regulatory Commission stated that they support financial asset management companies to play a greater role in supporting technological innovation. Currently, the scale of the latest batch of 18 pilot cities' signed intentions has exceeded 250 billion yuan.

Li Yunze stated that they will guide financial institutions to continuously increase financial supply, fully support the economic recovery turning for the better; simultaneously address both supply and demand sides, unblock credit distribution bottlenecks; and leverage banks as the main force for financing, where being good at lending, willing to lend, and daring to lend are key.

Chairman of the China Securities Regulatory Commission, Wu Qing:

Chairman Wu Qing of the Financial Street Holdings stated at the 2024 Financial Street Forum Annual Meeting that they will further deepen reforms in the capital markets, research and formulate plans for deepening capital market reforms, and deepen capital market investment and financing reforms. They will further enhance policy stability, transparency, and predictability, allowing various types of funds to develop better and better.

In response to pricing in the primary and secondary markets, and investor protection issues, they will focus on typical cases to achieve actual results.

Wu Qing stated that legal and compliant reductions would be allowed, but illegal and circumvention-era reductions would be strictly cracked down upon. For recently discovered violations, they have demanded buybacks and the surrender of price differentials, and held certain responsibilities. According to recent trading data, there have been no occurrences of clustering or illegal reductions, whether in the past year, or after September 24 or 26.

The China Securities Regulatory Commission will unwaveringly continue to advance comprehensive institutional opening in the market and institutions, broaden channels for overseas listings, and encourage foreign institutions to invest and expand their operations in China.

Zhu Hexin, Deputy Governor of the People's Bank of China:

Zhu Hexin, Deputy Governor of the People's Bank of China and Director of the State Administration of Foreign Exchange, stated at the 2024 Financial Street Forum Annual Meeting on the 18th that currently, there have been improvements in foreign direct investment, with an increase in the allocation of foreign assets in RMB. In the future, the stable operation of China's foreign exchange market and the balance of international payments remain the overall guiding principles. Cooperation with relevant departments to expand the high-level opening of the bond market to the outside world.

Zhu Hexin emphasized focusing on the effectiveness of foreign exchange policies and the real feelings of the people, strengthening policy evaluation and market communication. Adhering to criteria such as whether it aligns with the country's strategic positioning, whether it fits the actual development of local areas, and whether it brings tangible benefits to businesses and the people, comprehensive evaluations on the implementation of key forex policies in key areas such as Beijing, Shanghai, Guangzhou, pilot free trade zones, and other important regions were conducted, promoting targeted optimization and upgrades of policies, replicating and promoting them in a timely manner. Enhancing market communication, seeking reform focus areas and breakthroughs, and continuously enhancing the reform sense for operating entities.