Enriching Chinese households with equities needed to spur consumption: State-owned Media

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A round-up of China’s top economic and financial headlines as of 4 August, 2023:

Enriching households with equity funds needed to expand consumption (Economic Information Daily)

The State Council recently promulgated the National Development and Reform Commission’s “Measures on Restoring and Expanding Consumption” (关于恢复和扩大消费的措施), advancing 20 specific policy measures across six areas to fully release consumption potential and enhance the long-lasting momentum of high-quality development.

It is an undeniable truth that only people who have money are able and willing to consume. To make the cake of consumption bigger, it is necessary to expand the “pockets” of ordinary people, including finding ways to increase household income from assets, so that households can also earn money through stocks, funds and other channels. This will transform the willingness to consume into the ability the consume. 

The capital market has a great deal to do to promote consumption. China has more than 200 million shareholders and more than 700 million fund subscribers, and the “potential purchasing power” of the capital market cannot be underestimated. At the same time, however, the valuation level of equity assets in the capital market is generally low at present, and small and medium-sized investors generally lack a sense of gain. 

Some organizations estimate that the asset earnings of Chinese households account for less than 5% of GDP, which is quite different from that of developed countries in Europe and the United States. If there is no growth in asset income, the purchasing power of this huge investor group will inevitably be constrained.

China’s central bank again calls for reductions to rates on outstanding home loans (Securities Daily)

On 1 August, the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) held a work conference for the second half of 2023, calling for “guiding commercial banks to adjust the interest rates of outstanding personal home loans in an orderly manner in accordance with the law.” This is the second time that PBOC has recently called for the adjustment of interest rates on outstanding personal home loans.

On 2 August, a reporter from “Securities Daily” asked relevant executives or customer service personnel of 11 listed banks, including major state-owned banks and joint-stock banks, about the implementation of adjustments to interest rates on outstanding personal home loans. As of the time of writing, except for some banks that have not responded, multiple banks said that they had no specific implementation plan for the time being, and some banks told reporters that they are “conducting investigations.”

Opening China’s financial markets at a higher level – experts propose launch of “South-bound Exchange Connect” (People’s Daily)

On 1 August, the People’s Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) held a work conference for the second half of 2023. In terms of “deepening financial international cooperation and high-level opening up of the financial sector”, the meeting called for “simplification of the procedures for foreign investors to invest in China’s markets, enriching the types of investable assets, further facilitating foreign investors to increase their holdings of renminbi assets, and promoting the internationalization of renminbi in an orderly manner.”

Since the start of this year, a series of facilitation measures for foreign investors to increase their holdings of renminbi assets have been introduced and implemented. On 15 May, transactions under “Northbound Exchange Connect” were officially launched. Members of the financial sector believe that the launch of the initiative has enriched the risk-hedging tools for foreign investors and will attract more foreign funds to flow into the Chinese bond market.

Wang Chunying, deputy director at SAFE, said China’s bond market has become an important option for foreign investors when investing globally. As of the end of June this year, more than 1,100 institutions from over 60 countries around the world have entered China’s interbank bond market. The transaction activity of foreign institutions is also on the rise. Last year, the total transaction volume of foreign institutions exceeded two trillion US dollars, an increase of more than 8-fold compared with 2016, prior to significant opening up. 

The investment targets of foreign-invested institutions have also expanded. In addition to treasury bonds, policy financial bonds, and interbank certificates of deposit, foreign institutions are now gradually investing in China’s short-term financing bonds, medium-term notes and other credit bonds, as well as asset-backed securities and other debt assets.

Jack Ma’s latest move – entering the agricultural sector (Securities Journal)

Recently, a marine technology company established in Hangzhou has attracted market attention

Tianyancha information shows that Jack Ma indirectly holds equity in this newly established company, 1.8 Ocean Technology (Zhejiang) Co., Ltd. (一米八海洋科技(浙江)有限公司). 1.8 Ocean Technology (Zhejiang) is considered to be Jack Ma’s new investment trend.

Securities regulator solicits opinions from leading brokerages on invigourating capital markets (National Business Daily

Several days ago, the China Securities Regulatory Commission (CSRC) convened a meeting with relevant executives from several top brokerage firms to solicit opinions on “invigourating the capital market and boosting investor confidence,” as proposed at the last Politburo meeting held on 24 July. 

Before that, from 24 to 25 July, CSRC held a symposium on the mid-year work for 2023 to study and deploy key tasks in the second half of the year, calling for the better implementation of policies to invigourate and further stimulate the vitality of the capital market.

“The market can expect more measures,” a brokerage analyst told National Business Daily.

State Council solicits opinions from the public on strengthening China’s private economy (Chinese government

[On 28 July], in order to implement the “Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy” and promote the resolution of the difficulties and problems faced by the development and growth of the private economy, the State Council’s “Internet + Supervision” platform commenced the collection of questions, tips and proposals from the public. 

The General Office of the State Council will summarize and sort out the tips and proposals received, and urge relevant localities and departments to study and deal with them. For tips on important problems that strongly affect enterprises and the public, have a negative social impact, and are commonplace and widespread, the Inspection Office of the State Council will directly send personnel to conduct inspections. If they are verified to be true, they will be dealt with seriously in accordance with laws and regulations.

Ministry of Housing’s new stance of benefit to commercial banks (Securities Daily

Recently, Ni Hong, Minister of Housing and Urban-Rural Development (MOHURD) stated that it is necessary to continue to consolidate the stabilization and recovery of the real estate market, vigorously support inelastic and renovation housing demand, and further implement the reduction of the down payment ratio and loan interest rate for first home loans, as well as the taxes and fees for the replacement of improved housing.

The statement made by Minister of Housing and Urban-Rural Development Ni Hong is not only good for the real estate market, but also good for commercial banks. 

First of all, it will help commercial banks “replenish” high-quality assets and resolve asset shortages. Secondly, it is conducive to improving the asset quality of outstanding corporate real estate loans.

Furthermore, from a macroeconomic perspective, it is also good for the banking sector. Stabilizing the construction and real estate industries plays an important role in promoting economic recovery. As a pro-cyclical sector, the development of commercial banks is closely and positively related to macroeconomic trends. Consequently, a healthy real estate market can also be regarded as a major positive for the banking sector.

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