Factbox-China rolls out broad rate cuts and other stimulus to spur weak economy

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2024.09.24 01:10

By Summer Zhen

(Reuters) – China announced a broad range of measures on Tuesday to support the faltering economy, stabilise the housing sector and restore market confidence. Stocks and bonds jumped after the announcement.

Here are the key measures announced in the press conference by People’s Bank of China (PBOC) Governor Pan Gongsheng, alongside National Financial Regulatory Administration Minister Li Yunze and China Securities Regulatory Commission (CSRC)Chairman Wu Qing:

RRR CUT

China’s central bank will cut banks’ reserve requirement ratio (RRR) by 50 basis points in the near future, freeing up about 1 trillion yuan ($142.21 billion) for new lending.

Depending on the market liquidity situation later this year, the RRR may be further lowered by 0.25-0.5 percentage points, Pan said.

RATE CUT

China’s central bank will cut the seven-day reverse repo rate by 0.2 percentage points to 1.5%.

Pan expects the measure will guide the medium-term lending facility (MLF) rate lower by about 0.3 percentage point, and the loan prime rate (LPR) and deposit rates lower by 0.2-0.25 percentage point. Pan did not specify when the moves would come into effect.

REDUCTION IN EXISTING MORTGAGE RATES

China’s central bank will guide commercial banks to reduce the interest rates on existing mortgages by 0.5 percentage point on average, in order to provide some relief to households.

LOWER DOWN PAYMENT

China will lower the minimum down-payment ratio to 15% for second-home buyers national-wide, from current 25%.

REVIVING STOCK MARKET

China’s securities regulator will issue guidance for medium and long-term funds to enter the market, and measures to promote mergers, acquisitions and reorganizations.

The CSRC will further support China’s state fund Central Huijin Investment in stock purchases and expanding investment scope.

FUNDING FOR STOCK PURCHASE

The PBOC has also introduced two new tools to boost the capital market.

The first – a swap programme with an initial size of 500 billion yuan – allows funds, insurers and brokers easier access to funding in order to buy stocks.