The China Banking News Briefing: a round-up of the top economic and financial headlines in the Chinese press as of 25 January, 2024.
Central bank cuts required reserve ratio, unleashes 1 trillion yuan in liquidity (People’s Daily)
In order to consolidate and enhance the positive trend of economic recovery, the People’s Bank of China (PBOC) has decided to lower the required reserve ratio for financial institutions by 0.5 percentage points starting from February 5, 2024 (excluding financial institutions that have implemented a 5% deposit reserve ratio).
Following the reduction, the weighted average required reserve ratio of financial institutions will be approximately 7.0%. Additionally, starting from 25 January, 2024, the interest rates for reloans to support agriculture, reloans to support small businesses and re-discounting will all be reduced by 0.25 percentage points.
China’s current average required reserve ratio is 7.4%. This 0.5 percentage point reduction to the required reserve ratio for financial institutions will provide the market with long-term liquidity of 1 trillion yuan.
Re-lending and re-discount rates to support agriculture and small businesses have fallen 2% to 1.75%, which will help drive down the loan prime rate (LPR)- the benchmark for credit pricing.
Securities regulator calls for creation of investor-focused capital market; Chinese central bank and State Council all send positive signals on stocks (Cai Shelian)
With regard to stock market fluctuations, investor protections, capital market supervision, monetary policy and other issues, the State Council and other ministries and commissions have recently issued a slew of statements sending strong signals.
- The State Council stressed the need to adopt more powerful and effective measures to stabilize the market and stabilize confidence.
- The central bank’s fourth quarter meeting stressed the need to intensify the implementation of monetary policies that have already been put in place. Pan Gongsheng (潘功胜), governor of the central bank, said on 24 January that the deposit reserve ratio would be lowered by 0.5 percentage points starting on February 5.
- The State-owned Assets Supervision and Administration Commission (SASAC) of the State Council will further study the inclusion of market value management in the performance evaluation of leaders of central state-owned enterprises. SASAC said that it will focus on improving the quality of listed companies controlled by central SOEs and strengthening investor returns.
In his speech at the 17th Asian Financial Forum, Li Yunze (李云泽), head of the National Administration of Financial Regulation (NAFR), called for further deepening the interconnection between the financial markets of mainland China and, Hong Kong and Macao.
The China Securities Regulatory Commission (CSRC) held its first press conference in 2024 on 12 January, stating that the current A-share market valuation level is at a historically low level, and that the market harbours high investment value in the long term.
Wang Jianjun (王建军), CSRC deputy-chair, said in an interview on 24 January that China should build an investor-oriented capital market.
“We should not bring companies without long-term returns to the market – we should vigorously promote listed companies to repurchase and cancel shares and increase dividends, in order to improve returns for investors.”
Securities regulator calls for driving more medium/long term funds into stock market, continually strengthening its internal stability (Diyi Caijing)
According to the official website of the China Securities Regulatory Commission (CSRC), on 23 January, Yi Huiman (易会满), CSRC chair and party secretary, presided over a party committee meeting to share, study and implement General Secretary Xi Jinping’s special seminar on promoting high-quality financial development for leading cadres at the provincial and ministerial levels.
The meeting stressed:
- Firmly walking the path of capital market development with Chinese characteristics.
- Employing full force in maintaining the stable operation of the capital market.
- Further implementing comprehensive deepening of capital market reform and opening.
- Lawfully strengthening comprehensive regulation and effectively preventing and resolving risk.
- Deeply implementing comprehensive and strict party regulation.
Share value to be included in assessment of China’s central state-owned enterprises (Securities Journal)
A CITIC Securities research report from January 2024 cited a senior official from the State-owned Assets Supervision and Administration Commission (SASAC) as stating for the first time that the authority would research the inclusion of market value management results in the assessment of the leaders of central state-owned enterprises (SOEs).
Previously, the operating indices of central SOEs have been included in the performance evaluation systems, and. improving the operating efficiency and safety of central enterprises has naturally led to indirect increases in the share values of central SOEs.
In terms of direct methods, central SOEs may further strengthen optimization management of market value by encouraging repurchases, increasing cash dividend ratios, and strengthening equity incentives.
Top 100 real estate company Rongqiao Group face liquidity risk and lawsuits over 492 million yuan in debt (Sina)
On 18 January Rongqiao Group Co., Ltd. (融侨集团) issued a public statement on the company’s overdue debt, accumulated litigation and arbitration proceedings and operating conditions.
The announcement indicates that as of 31 December, 2023, the principal balance of financial institution loans that Rongqiao Group and its holding subsidiaries had failed to repay as scheduled was approximately 492 million yuan, and the amount of commercial acceptance bills that they had failed to pay as scheduled was 21.0441 million yuan.
In addition, the total amount in relation to the unfinished litigation and arbitration cases between Rongqiao Group and its holding subsidiaries is approximately 498 million yuan.
Real estate enterprises welcome heavy-handed support policies: business loans available for repayment of outstanding debt (LanjingTMT)
On 24 January the General Office of the People’s Bank of China (PBOC) and the General Office of the National Administration of Financial Regulation (NAFR) jointly issued the “Notice on Effective Management of Commercial Property Loans” (关于做好经营性物业贷款管理的通知).
The “Notice” states that prior to the end of 2024, national commercial banks may issue business loans for the repayment of the outstanding loans and capital market bonds of real estate development enterprises and their share-controlled companies, if those real estate development enterprises have regular operations and strong development prospects.
Jack Ma returns as Alibaba’s biggest shareholder (Diyi Caijing)
According to reports, SoftBank currently has almost no Alibaba shares in its hands, while Jack Ma has replaced SoftBank as the company’s largest shareholder.
Around half a year ago, Jack Ma, who holds around 4.5% of Alibaba Group shares, surpassed SoftBank to become the largest shareholder in the company.
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