China’s Top Financial Headlines for the Week of 21 – 26 May 2023

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A round-up of China’s top financial headline from the week of 21 – 26 May 2023.

Steadily expand the opening of specific futures products and broaden the investment scope for QFII and RQFII: Fang Xinghai, vice chair of the China Securities Regulatory Commission

(中国证监会副主席方星海:稳步扩大期货特定品种开放 拓宽QFII和RQFII投资范围)

“On May 25, Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), said at the “20th Shangyan Forum” that the development of China’s futures market has always upheld the goals of serving the real economy and focusing on primary products to ensure supply and price stability. 

“Out of the 95 commodity futures and option types that have been listed so far, more than half of them are primary products. 

“In recent years, the futures market has strengthened basic system development, expanded opening up, improved operation quality, and promoted industry participation, providing enterprises with effective price signals and risk hedging tools.”

New batch of new local government debt quotas issued, major projects to accelerate

(新一批新增地方债额度下达 重大项目将加快落地)

A new batch of new local government debt quotas has recently been issued. According to public information from the China Bond Information Network, as of 23 May, the scale of new local government bond issuance exceeded 2 trillion yuan, and nearly 80% of the pre-approved quota has been completed.

“Experts said that the schedule for follow-up special bond issuance will be further accelerated, and it is expected that the issuance quota of 3.8 trillion yuan for the full year will be basically completed by the third quarter. 

“In the second quarter, infrastructure investment focused on the development of major projects will maintain a rapid growth rate. Looking at the full year, investment in new infrastructure may moderately advance and become the starting point for stabilizing investment.”

Price competition amongst banks for consumer loans intensifies, annualized rates starting with “3” become the norm

(银行消费信贷价格竞争加剧 年化利率“3字头”成常态)

“Against a background of stabilizing the economy and stimulating consumption, many banks have recently increased operations for the promotion of loans. The interest rate on personal consumer loans has fallen significantly compared with last year, and rates starting with ‘3’ have become the norm.  

“Judging from recently disclosed consumer credit data, however, household consumption is still at a low and there remains ample room for improvement. 

“In addition to reducing loan interest rates, banks also need to focus on products and services, innovation in financial products, and providing financial services to enhance household consumption capacity.”

Deposits and wealth management products ‘decline and increase’ in April: household willingness to save weakens and household deposits flowed back to the wealth management market 

(4月存款与理财规模“一降一升” 居民储蓄意愿下滑住户存款重新流回理财市场)

“In April, China’s renminbi deposits fell in year-on-year term, while the scale of wealth management products stopped declining and rebounded.

“Data from the central bank shows that in April China’s renminbi deposits decreased by 460.9 billion yuan, including a decline in household deposits of 1.2 trillion yuan. 

“Data also shows that as of the end of April, the scale of bank wealth management deposits was estimated to be 27.37 trillion yuan, for an increase of 1.34 trillion yuan compared March.

“Experts said that the sharp contraction of household deposits in April was due to seasonal factor on the one hand, but the year-on-year increase to a certain extent reflected a decline in the willingness of households to save, which may be caused by a rebound in risk appetites and the low deposit rate.”

Interest rate gap between first and second-home loans widens to 91 basis points across 100 Chinese cities

(首套与二套房贷利率差扩大 百城整体扩大至91BP)

“Although the LPR has remained unchanged for nine consecutive months, given the dynamic adjustment mechanism of the first-home loan interest rate policy, more and more cities have reduced their first-home loan rates. 

“It is worth noting that while first-home loan interest rates have undergone adjustment, second-home loan interest rates have remained unchanged. 

“At present, there is a large gap between the first-home and second-home loan rates in some cities. 

“According to data from the Beike Research Institute, in May the interest rate gap between first and second home loans across 100 Chinese cities expanded to 91BP, with the cost of loans for second-home renovations at a relatively high level.

“Industry experts said that the current demand for renovations is a key support for market recovery and recommended the implementation of policies on a city-by-city basis to appropriately reduce the interest rate for second-home loans to unleash renovation demand.”

 Development of China’s basic pension system accelerates 

(国家“清单”明确!基本养老服务体系加速构建)

“The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council recently issued the ‘Opinions on Promoting the Construction of a Basic Pension Service System’ (关于推进基本养老服务体系建设的意见). 

“The ‘Opinions’ is a major milestone in the history of the development of China’s aged care services. For the first time ever a central government document has confirmed the significance and primary tasks for promoting the basic aged-care system, and clarified the responsibilities of the government, society, markets and families in the provision of basic aged-care services.

Benchmark loan prime rate remains unchanged for 9 consecutive months: 1-year LPR at 3.65%, 5-year LPR at 4.3%

(LPR连续9个月不变!1年期为3.65%,5年期以上为4.3%)

“On 22 May the People’s Bank of China authorized the National Interbank Funding Center to announce that the loan prime rates were 3.65% for the 1-year tenor, and 4.3% for the 5-year-plus tenor, both of which are consistent with the previous month.

“Since it was reduced in August last year, the LPR for both terms has been put on hold.”

Lu Gang, President of CCB Housing Leasing Fund: The current contradiction between supply and demand in the rental market remains pronounced

(建信住房租赁基金总裁卢刚:当前的租赁市场供需矛盾依然突出 市场将向普惠化、机构化等方向发展

“On 21 May Lu Gang, president of CCB Housing Leasing Fund, said at the ‘2023 Tsinghua Wudaokou Global Financial Forum’ that the contradiction between supply and demand on the rental market is still quite prominent.

“On the demand side, according to data from the seventh national census in 2021 China’s floating population had reached 376 million people, most of whom meet their housing needs via rented housing.

“In structural terms, the age of marriage and childbearing is being postponed and many people are choosing to remain single. These factors have pushed up the demand for rental homes.”

“Urban youths have changed their consumption concepts and lifestyle concepts, and buying a house is no longer the only way for them to gain a sense of belonging.”