SCIO briefing on China's financial statistics 2020
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E-mail China.org.cn, January 18, 2021
Hong Kong's Bauhinia Magazine:
In 2020, financial institutions made 1.5 trillion yuan in interest concessions to boost the real economy. What measures were taken to achieve this? Will you issue new policies to encourage interest concessions by financial institutions in 2021? Thank you.
Chen Yulu:
I would like to invite Mr. Sun Guofeng to answer your questions.
Sun Guofeng:
In 2020, the PBOC fully implemented the decisions and plans of the CPC Central Committee and the State Council. Working together with relevant authorities, we guided the financial system to make 1.5 trillion yuan in interest concessions to boost the real economy. The measures included lowering interest rates, cutting fees, and deferring repayments of principal and interests of loans.
First, we deepened reform on the loan prime rate (LPR) to bring lending rates down further, saving enterprises a total of 590 billion yuan. The one-year LPR fell 30 basis points, lowering the annual lending rate in 2020 by 0.5 percentage points compared with 2019 and saving enterprises 560 billion yuan. Also, we successfully completed LPR switch of outstanding floating interest rate loans by the end of last August, saving enterprises 28 billion yuan by direct interest rate cuts during the switch and falling LPR after repricing.
Second, we offered re-lending and rediscount quotas to support cheaper loans, saving enterprises 46 billion yuan. The PBOC increased re-lending and rediscount quota by 1.8 trillion yuan in three batches, enabling financial institutions to issue loans with competitive interest rates. All the quota had been used by the end of 2020.
Third, the downward trend in bond interest rates has provided approximately 120 billion yuan in profits to bond issuers. Meanwhile, interest rates of newly issued national bonds, local bonds, and corporate credit bonds in 2020 are 0.47 percentage points lower than in 2019.
Fourth, the two direct tools made a profit of 380 billion yuan. Last year, the inclusive small and micro-enterprise loan extension support tool provided 358 billion yuan in profits for enterprises by reducing corporate interest expenditures and bridge costs. The inclusive small and micro-credit loan support program saved 24 billion yuan in guarantee costs for enterprises. The China Banking and Insurance Regulatory Commission has also guided banks to transfer profits by urging them to reduce fees, support corporate restructuring, and make debt-to-equity swaps. These transfers are expected to secure around 420 billion yuan. The total amount of money accrued from the above measures indicates that 1.5 trillion yuan has been successfully transferred to the real economy.
In the next stage, the People's Bank of China will insist on seeking progress while maintaining stability, do well to create cross-cycle policy design, deepen reforms in interest rate marketization, continue to release LPR reforms potential, consolidate achievements via the reduction of real interest rate on loans, and promote the steady decline of corporate financing costs. Thank you.
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