The Governor of the People’s Bank of China (PBOC), Pan Gongsheng, revealed on Friday that the central bank has laid out specific guidelines for stock buybacks and re-loans aimed at boosting equity holdings. He emphasized that it is crucial to adhere to regulations that prohibit credit funds from improperly entering the stock market. The measures being implemented are designed to stabilize the capital market while adhering to market-oriented principles, with the central bank’s swap facility not representing direct financial support.
As market conditions evolve, there is an anticipation of potential reductions in the reserve requirement ratio (RRR) by the end of the year. This shift would be part of a broader strategy to transition macroeconomic policy from a focus solely on investment to a more balanced approach that considers both investment and consumption. The goal is to refine the monetary policy framework to promote a moderate increase in prices.
Predictions suggest that the RRR may be decreased by 0.25 to 0.5 percentage points, contingent upon market liquidity. Additionally, the central bank is expected to lower the interest rate on the 7-day reverse repo operation by 0.2 percentage points and may consider a 0.3 percentage point reduction in the interest rate of medium-term lending facilities based on liquidity conditions. There is also a likelihood that the loan market prime rate (LPR) could see a decline of 0.2 to 0.25 percentage points.
Furthermore, the PBOC announced the launch of a new swap facility specifically designed for securities, funds, and insurance companies. This initiative will involve 20 approved securities and fund firms, with the first round of application quotas surpassing 200 billion yuan. The swap facility operations commenced officially on Friday, aiming to enhance financial stability within these sectors.
