Regulators assure cheaper finance
PBOC hints at more RRR cuts; CSRC stresses better protection for investors
China’s policymakers will further reduce financing costs, ensure ample liquidity and enhance protection of capital market investors’ legitimate rights this year to create an accommodative financial environment for the country’s economic recovery, officials and experts said on Wednesday.
Pan Gongsheng, governor of the People’s Bank of China, the country’s central bank, said that China still has the scope to further cut the reserve requirement ratio — the proportion of money that lenders must hold as reserves — as intensified macroeconomic adjustments are needed to cope with complex and changing international and domestic situations.
Addressing a news conference of the ongoing second session of the 14th National People’s Congress, the nation’s top legislature, on Wednesday, Pan said the average RRR of China’s banking industry is currently 7 percent after a 50-basis-point cut in February, and has room for further slashing.
The overall financing costs will be further lowered, Pan said, as the PBOC will deem keeping prices stable and promoting a moderate recovery in prices as important considerations of monetary policy adjustments while taking into account the soundness of banks’ balance sheets.
“We still have enough tools and enough policy room for maneuvers,” Pan said, adding that the central bank will also set up a relending facility to support technological innovation and transformation.
Pan further said that factors such as a narrowing gap between domestic and foreign monetary policy cycles, a weakening of the US dollar’s appreciation momentum and the rising renminbi settlements in foreign trade all offer more room for China’s monetary policy adjustments and are conducive to the renminbi’s exchange rate stability.
Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank, said she expects to see cuts in policy interest rate benchmarks of 10 to 20 basis points and a 25-basis-point RRR cut this year, which will help sustain a robust annual credit growth of around 9.5 percent.
The Government Work Report, delivered on Tuesday, has vowed to implement prudent monetary policy in a flexible, appropriate, targeted and effective way while making efforts to enhance the underlying stability of the capital market.
Policymakers will not hesitate to take resolute measures to correct market failures and forestall systemic risks if the capital market experiences extreme volatility, Wu Qing, chairman of the China Securities Regulatory Commission, said.
The A-share market has recently rebounded after witnessing substantial fluctuations earlier this year, with the benchmark Shanghai Composite Index closing at 3039.93 points on Wednesday, rising by 2.18 percent since the beginning of the year, albeit down marginally from Tuesday.
“Protecting the lawful rights and interests of investors, especially small and medium-sized investors, is the most important and central task of the CSRC,” Wu said.
The CSRC will correct regulatory loopholes — such as when it comes to fake divorces, short selling and securities refinancing — to further restrict big shareholders’ illegal shareholding reductions and improve relevant rules to better regulate quantitative trading to further ensure market fairness.
Stricter standards for delisting will be launched while mandatory steps will be imposed against listed companies that do not pay out dividends for years, Wu said, adding that the CSRC will encourage listed companies to give multiple dividends each year, in particular before the Spring Festival.