Chinese central banker arrested, loan prime rate declines, Wang Huning says consumption is a duty

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A round up of China’s top financial news stories as of Wednesday 21 June 2023:

China’s benchmark loan prime rate (LPR) declines, and a senior official from the Chinese central bank is placed under arrest following allegations of bribery. 

Wang Huning, the eminence gris of Chinese elite politics, says increasing consumption is the “duty” of China’s modernization undertaking, while Beijing flags more policies to support income growth and consumption. 

Growth in new home prices stalls in major Chinese cities, and pre-owned homes see prices edge lower. 

Smaller regional lenders are now following the lead of the large-scale national banks in reducing deposit rates at the behest of Chinese regulators. 

Loan prime rate falls, how will it affect the real estate, stock and bond markets?  (Investor.org.cn)

“After the central bank lowered the open market operation 7-day reverse repo rate, standing lending facility (SLF) rate and medium-term lending facility (MLF) interest rate by 10 basis points on 13 June and 15 June respectively, the loan prime rate (LPR) saw its first decline in 10 months on 20 June. 

“On 20 June, the 1-year LPR came in at 3.55% as compared to 3.65% the previous month, while the 5-year and above maturity was 4.2%, as compared to 4.3% last month. 

“‘The LPR reduction will affect loan rates in general and achieve the effect of increasing counter-cyclical adjustment and supporting the real economy,’ a researcher from Fubon’s fixed income department said. 

“With regard to the real estate market specifically, Yang Delong, former chief economist at Haikai Yuan Fund, said that the sales side needs to introduce more policies to promote the recovery of real estate sales. 

‘The current market environment has undergone tremendous changes, and the transaction volume in most cities is only a fraction of the peak transaction volume,’ he said. ‘We should let the real estate market return to marketization, which is conducive to promoting real estate sales and driving inelastic and renovation housing. 

‘The basis of speculation is expectations by speculators that housing prices will rise rapidly and have a strong profit-making effect, but such conditions are obviously not available now, so it should be a good move to introduce certain loosening measures for real estate sales as soon as possible. 

‘Real estate is a pillar industry of the national economy, and its performance has a considerable impact on the national economy.'”

Supreme People’s Procuratorate orders arrest of Fan Yifei, the former deputy governor of the Chinese central bank, under suspicion of accepting bribes: (CCTV

“This reporter has learned from the Supreme People’s Procuratorate that Fan Yifei, former party committee member and deputy governor of the People’s Bank of China, is suspected of accepting bribes. 

“Investigation by the National Supervisory Commission has concluded and the case has been transferred to the procuratorate for review and prosecution. 

“Several days ago, the Supreme People’s Procuratorate made the decision to arrest Fan Yifei on suspicion of accepting bribes. The case currently is being processed.”

Wang Huning attends ‘Recovery and Expansion of Consumption’ research and consultation symposium  (Xinhua)

“Wang Huning, member of the Politburo Standing Committee and chairman of the CPPCC National Committee, attended the ‘Recovery and Expansion of Consumption” Research and Consultation Symposium that was held in Beijing on 20 June.

“Wang said that it is necessary to deeply understand that restoring and expanding consumption is the true meaning of promoting Chinese-style modernization, the necessary choice for achieving high-quality development, and an intrinsic requirement for achieving annual targets for economic development.”

Multiple real estate indices weaken in first-tier cities, there’s still room for policy optimisation (21st Century Business Herald)

“The National Bureau of Statistics recently released data on housing prices in 70 cities in May. The overall growth in new housing prices in 70 cities fell month-on-month, while pre-owned housing prices also fell month-on-month. The changes in housing prices in first-tier cities also showed similar characteristics.

“In May, the sales prices for new houses in first-tier cities rose by 0.1% month-on-month, a decrease of 0.3 percentage points from the previous month. Beijing, Shanghai and Guangzhou rose by 0.2%, 0.3% and 0.1% in month-on-month terms respectively, while Shenzhen fell by 0.2%. 

“During the same period, the sales prices for pre-owned housing in first-tier cities changed from a month-on-month increase of 0.2% to a month-on-month decrease of 0.4%, with Beijing, Shanghai, Guangzhou and Shenzhen falling 0.6%, 0.8%, 0.2% and 0.1% respectively in month-on-month terms.”

“In addition to housing prices, the scale of new and second-hand housing transactions in first-tier cities in May also declined, while the second-hand housing market was characterized by a continued increase in listings.”

“Tidal wave” of deposit rate cuts spreads to regional small and medium-sized banks (Beijing Shangbao)

“After hitting the big state-owned large banks and joint-stock banks, the ‘tidal of interest rate cuts’ on deposits has started to spread to regional small and medium-sized banks. 

“Research by Beijing Business Daily found that as of 18 June many banks, including Leizhou Rural Commercial Bank, Huilai Rural Commercial Bank, Heshan Rural Commercial Bank, Xinxiang Zhongyuan Rural Bank, and Ya’an Yucheng Huimin Rural Bank have announced reductions to deposit rates. 

“As deposit interest rates have successively fallen, depositors can no longer sit still and are now forming special syndicates to make cross-city deposits, in order to find the best means of achieving high yields.

“Interest rates on demand deposits and medium and long-term deposits are the main categories affected. Taking Leizhou Rural Commercial Bank as an example, the bank stated that in order to comply with the trend of market-oriented interest rates, it had adjusted the deposit rate starting from 19 June. 

“The adjusted current deposit rate is 0.2%, which is 5 basis points lower than before the adjustment. The fixed deposit interest rates for 1-year, 2-year, 3-year, and 5-year terms are 1.85%, 2.28%, 2.75%, and 2.75%, respectively, for no adjustment.”

National Development and Reform Commission: research and deployment to strengthen the work of increasing household income and raising employment stability (CCTV)

“The National Development and Reform Commission(NDRC) has recently engaged in study and made arrangements for strengthening work to increase household income; support and increase the income of low-income earners, and actively explore effective means of raising household income. 

“Meng Wei, deputy director of the Political Research Office of NDRC and NDRC spokesperson, said that the next step would be for NDRC to deepen cooperation with other departments on income allocation system reforms, continue to drive the implementation and effectiveness of all key work missions for the year, and strive to achieve basic consistency between growth in household incomes and economic growth.”