Your attention is my accelerant, pay attention to it, learn more about finance, learn about finance, and understand finance.
Introduction: In December 2023, the central bank released an important news, saying that the China Development Bank, the Export-Import Bank of China and the Agricultural Development Bank of China will add 350 billion yuan in additional collateral supplementary loans. This is seen as a special way of printing money, in which the central bank lends money to policy banks at low interest rates, which then lend the funds to major national projects. The move aims to stabilize market confidence and boost economic growth. In addition, the central bank has other money printing tools, such as foreign exchange appropriation, RRR cut, MLF, PSL, etc., but PSL will only be activated during special periods.
Collateral Supplementary Loan (PSL) is a low-interest loan by the central bank to a policy bank, which in turn lends to major national projects, such as shantytown reconstruction, underground pipe corridors and major water conservancy projects. This method is essentially a special money printing tool of the central bank, which is used at a critical moment to send an important signal to the market to stabilize economic growth.
As a money supply tool, collateral supplementary loans play an important economic role. In China's economic development, investment has played a crucial role in driving economic growth. However, due to budget constraints and other factors, the input cannot meet all project needs. Therefore, the central bank provides policy banks with low-interest loan opportunities in the form of collateral supplementary loans, and then supports major projects. This method can not only provide the necessary financial support for **, but also inject a certain amount of money into the market, which promotes economic growth.
In addition to collateralizing supplementary loans, the central bank also has several other money printing instruments, including foreign exchange appropriation, RRR cuts, and MLF (or reverse repo). These tools work differently and have different impacts on the economy. Among them, the RRR cut means that commercial banks can automatically obtain more liquidity for issuing loans, and this part of the funds is long-term. MLF (or reverse repo) is when the central bank lends money to a commercial bank and returns it at an agreed maturity date. Unlike RRR cuts, MLF (or reverse repo) operations are more frequent, almost every month. Collateral supplementary loans, on the other hand, are loans from the central bank to policy banks at low interest rates to support major national projects, and are generally only used for specific periods.
As the country's leading bank, the central bank has a variety of money printing tools to choose from to respond to different economic situations and policy needs. Among them, the RRR cut is a common monetary policy tool, which enables commercial banks to obtain more loanable funds by reducing the reserve requirement ratio, thereby promoting economic growth. In contrast, MLF (or reverse repo) is a way for the central bank to provide short-term funds to commercial banks to maintain the smooth operation of the market through temporary liquidity injections. Collateral supplementary loans are provided by the central bank to policy banks in a low-interest manner to meet the funding needs of major national projects. These different money printing tools have different operating frequencies and operational objectives in the implementation process, but the purpose is to achieve the goal of macroeconomic regulation and control and promote the healthy development of the economy.
The 350 billion yuan supplementary mortgage loan will be mainly used to promote the construction of affordable housing, the construction of public infrastructure for both ordinary and emergency purposes, and the transformation of urban villages. These projects are key areas of national development, which are of great significance for improving people's quality of life, improving the urban environment and promoting economic growth. According to the estimation of GF** Fixed Income Liu Yu's team, the leverage effect of the mortgage supplementary loan on the shantytown reform investment is about 1:2, that is, every 100 million yuan of mortgage supplementary loan can leverage the investment of 200 million yuan. If calculated according to the scale of the average annual investment of 600 billion to 800 billion yuan, the required collateral supplementary loan funds are about 300 billion to 700 billion yuan. If all these funds are used in the real estate sector, it is expected that the pull effect on real estate investment in 2024 may be between 2% and 5%.
The purpose of the mortgage supplementary loan is mainly focused on promoting the construction of affordable housing, the construction of public infrastructure for both ordinary and emergency purposes, and the transformation of urban villages. The construction of affordable housing is an important means to solve the problem of urban housing difficulties, by providing low-cost housing, improving the living conditions of low-income people, and effectively improving the living standards of urban residents. At the same time, the construction of public infrastructure can provide better urban services, improve the construction and management of urban infrastructure, and provide people with a more convenient living environment. The transformation of urban villages is to transform old areas of the city, improve the image and living environment of the city, and promote the sustainable development of the city.
The impact of collateral supplementary loans on the economy is mainly reflected in two aspects. First of all, the initiation of collateral supplementary loans can make up for the shortcomings of investment. At present, the growth rate of China's fixed asset investment is gradually slowing down, and the growth rate of investment is far lower than the growth rate of consumption. Due to the decline in investment, economic growth is under certain pressure. At this time, the central bank launched mortgage supplementary loans, which is conducive to increasing investment and achieving the goal of stable growth and stable employment in 2024.
In addition, mortgage supplementary loans also help to promote the transformation and upgrading of real estate. At present, China's real estate market is divided into two parts: the affordable housing market and the commercial housing market. The affordable housing market is dominated by low and closed transactions, mainly for low-income people. The commercial housing market is traded in accordance with the laws of the market, ** determined by the market, mainly for high-income people. In the past, the development of the affordable housing market mainly relied on the development of the commercial housing market, and funds were obtained through the sale of commercial housing. However, due to the current recession in the commercial housing market, collateral supplementary loans are needed to promote the development of the affordable housing market. Although the construction of a large number of affordable housing may reduce people's demand for commercial housing, the reduction of the financial attributes of affordable housing can also stimulate more people to consider buying commercial housing to achieve the purpose of stabilizing the real estate market.
Collateral supplementary loans, a special money-printing tool of the central bank, were restarted in December 2023. It will be mainly used to promote the construction of affordable housing, the construction of public infrastructure for both ordinary and emergency purposes, and the transformation of urban villages, so as to stabilize market confidence and promote economic growth. Collateral supplementary loans are one of the central bank's special money printing tools, which are different from other monetary policy tools such as RRR cuts, MLF (or reverse repo). Mortgage supplementary loans have the role of making up for investment shortcomings and promoting real estate transformation and upgrading, and have a positive impact on economic development. However, the practical use of these funds and their specific impact on the economy need to be further observed and studied.
If you like it, you can follow me, share financial advice regularly, and talk to you about financial topics.