China’s domestic demand and consumption remain sluggish. On the 24th, the People’s Bank of China (central bank) and five other departments jointly issued the “Guiding Opinions on Financial Support for Boosting and Expanding Consumption”, introducing 19 measures in six key areas including “strengthening support for enhancing consumption capacity”, “expanding financial supply in the consumption sector”, and “increasing financial support in key areas of consumption”.
According to data released by the National Bureau of Statistics of China, the Consumer Price Index (CPI) for May fell by 0.1% year-on-year, marking the fourth consecutive month of negative growth; the Producer Price Index (PPI) for May dropped by 3.3% year-on-year, the largest decline in 22 months.
On the 24th, the People’s Bank of China published the “Guiding Opinions on Financial Support for Boosting and Expanding Consumption” on its official website, requiring local financial management departments to “continuously improve the financial service system, enhance the capacity for financial services, focus on key areas and links of consumption to strengthen financial support, and provide strong backing for better leveraging the fundamental role of consumption in economic development.”
The “Opinions” state that financial institutions should strengthen financial services for both consumption supply and demand, meet the diversified financing needs of various entities, promote the expansion of high-quality consumption supply, and help unlock the potential for consumer growth.
The “Opinions” put forward 19 measures in six aspects: supporting the enhancement of consumption capacity, expanding financial supply in the consumption sector, tapping and releasing the potential of residential consumption, promoting the efficiency of consumption supply, optimizing the consumption environment, and providing policy support and guarantees.
In “consolidating the macroeconomic foundation and stabilizing consumption expectations”, efforts will be made to increase support for the real economy, strengthen the coordinated linkage of financial, fiscal, industrial, and other policies. Proper implementation of monetary policy will be ensured, along with strengthened counter-cyclical and cross-cyclical adjustments, comprehensive use of reserve requirements, relending and rediscount, open market operations, and other monetary policy tools to maintain ample liquidity and continue to reduce the overall social financing costs.
In “supporting residents’ employment and income growth and enhancing consumption confidence”, financial services will be strengthened for private, micro and small enterprises, and self-employed businesses with strong employment absorption capacity. The policy of start-up guarantee loans will be implemented in depth, with encouragement to moderately relax application conditions and simplify approval processes according to local conditions, thereby promoting entrepreneurship and income growth for eligible individuals and enterprises.
In “giving play to the main channel role of credit support”, financial institutions are encouraged to establish and improve internal organizational structures and professional teams, providing precise, efficient, and convenient financial services in the consumption sector. On the premise of controllable risks, innovation and optimization of credit products will be promoted, and greater support will be given to eligible operating entities in the consumption industry, including first-time loans, renewed loans, credit loans, and medium- and long-term loans.
In “strengthening the incentive role of structural monetary policy tools”, financial institutions are encouraged and guided to grant loans to various business entities in key service consumption fields such as wholesale and retail, accommodation and catering, cultural and sports entertainment, tourism, education, and residential services, supporting them to enhance the quality and efficiency of service consumption supply.
The “Opinions” also require to “increase the financing support of the bond market” and “expand diversified consumption financing channels”.
In “promoting the expansion of goods consumption”, financial institutions are encouraged to provide financial services for the replacement of consumer goods in various ways and through multiple channels. There will be increased credit support for enterprises involved in scrapped motor vehicle recycling and dismantling, recycling of used home appliances and appliance replacement, home renovation and kitchen/bathroom upgrades, and ensuring the supply of daily necessities.
The “Opinions” also call for active development of auto loan business, taking into account borrowers’ credit status, repayment ability, etc., to reasonably determine the loan-to-value ratio, term, and interest rate, as well as appropriately reducing or waiving penalties for early settlement of loans during automobile trade-ins. Financial support for the production and consumption of green and smart home appliances and furnishings will be strengthened, with optimized approval processes and improved service quality and efficiency. Efforts will be made to strengthen financial support for foreign trade enterprises seeking to expand domestic sales, improve domestic trade insurance services, and broaden consumption of quality products from the foreign trade sector.
The “Opinions” also propose “supporting the construction of consumption-related infrastructure”, focusing on key areas such as cultural, tourism and sports facilities, event and performance venues, medical and elderly care facilities, communication stations, charging equipment, and elder-friendly renovation, and exploring innovative financial products and financing models suitable to the funding needs of these infrastructure projects.