Chinese government announces measures to support financial and economic stability
Monetary Policy:
・The 5 Monetary Authority Divisions announced policies to deal with 30 monetary aspects (Feb 1) (Supply adequate liquidity, refinance, prevent withdrawal of loans and reluctance to lend to impacted companies, etc.)
・The People’s Bank of China to refinance 300 billion renminbi (Feb 1). Issued instructions to keep market lending rates below 3.15% (LPR rate is 4.15%)
・Liquidity supply (1.2 trillion renminbi (Feb 3) + 0.5 trillion renminbi (Feb 4))
・Cut the (7-day and 14-day) reverse repo rates (Feb 3)
・Suspension of night time futures trading and short selling from February 3 (Feb 2)
・Moves to lower the interest rates on loans to small companies at major banks and regional banks
・Monetary Authorities in regional areas such as Shanghai announce intent to loosen “tolerance levels” for non-performing loans
・Cut MLF interest rate (3.25%, 3.15%, Feb 17)
Tax Policy:
・Subsidized interest payments (50% of the lending rate for refinancing. Anticipate real interest rate burden of below 1.6%) and enhanced credit guarantee service (simplified and more efficient administration, special proxy repayments, etc.)
・Regions that meet the criteria to secure funds to compensate for lending risk, promoting compensation for the portion of loans by financial institutions to small companies which have become non-performing
・Regional governments (Suzhou, Shanghai, Beijing) to reduce the cost burden, particularly for small companies (Postpone payment of social insurance premiums, tax exemptions and postponed payments, rent reductions or exemptions, etc.)
・Additional 800 billion renminbi in advanced issuance of local government bonds (total of about 1.85 trillion renminbi, of which 1.29 trillion renminbi is local government bonds)
Employment:
・Ease restrictions with partial refunds of unemployment insurance premiums to companies that maintain employment
・Introduce nearby employers to farmers who have constraints on moving long distances and job creation by the government
+ Thank you Mizuho Research Institute
