Finance is an industry that operates risks, and preventing and resolving financial risks is the eternal theme of financial work. Since 2023, various aspects of risk prevention and mitigation have been progressing in an orderly manner, financial risks in key areas have been resolved prudently, and the operation of the financial system has remained stable.
Strengthen the monitoring and assessment of financial risks, strengthen the construction of systems and mechanisms, and promote the prudent handling of risks in key regions and key institutions. The debt risk resolution of financial support financing platforms has been progressing in an orderly manner. Strengthen the construction of the financial stability guarantee system, and improve the financial risk prevention, early warning and disposal mechanism. "The 2024 People's Bank of China work conference held a few days ago summarized the financialization risk work in 2023.
Continuing to effectively prevent and resolve risks in key areas will remain an important part of financial work in 2024. The ** Economic Work Conference held at the end of 2023 proposed to coordinate and resolve risks such as real estate, local debt, and small and medium-sized financial institutions, severely crack down on illegal financial activities, and resolutely adhere to the bottom line of no systemic risks. The work conference of the People's Bank of China also made specific arrangements for the risk reduction work in these three key areas: rational use of debt restructuring, replacement and other means to support the resolution of debt risks of financing platforms;According to the city's policies, we will accurately implement differentiated housing credit policies to meet the reasonable financing needs of various real estate enterprisesPromote the resolution of risks of small and medium-sized financial institutions.
The interviewed experts believe that although facing short-term fluctuations, China's economy is resilient, has great potential and vitality, and the long-term positive fundamentals have not changed, which is the confidence and support for us to firmly guard against systemic financial risks. In 2024, with the financial management department taking precautions and taking multiple measures at the same time, new progress and new results will be made in the risk mitigation work, and the overall financial risk will show a convergence trend.
Support the debt risk resolution of financing platforms
Since last year, there has been much attention paid to the risk of local debt and how finance can support local debt. Judging from the information disclosed by the Ministry of Finance, in 2023, China's ** legal debt ratio (** debt balance to GDP) will be 504%, which is lower than the internationally accepted 60% warning line, and also lower than that of major developed economies and emerging market countries. However, it is worth noting that the distribution of local ** debts is uneven, and some local debts are at high risk, and the pressure on repayment of principal and interest is greater. The Politburo meeting held on July 24, 2023 called for "effectively preventing and resolving local debt risks and formulating and implementing a package of debt reduction plans". In 2023, the financial management department, together with relevant departments, has taken a number of measures to actively support local governments to resolve debt risks prudently.
Regarding the specific measures of financial support for localized debts, Pan Gongsheng, governor of the People's Bank of China, previously introduced that the financial management department has issued relevant policies to guide financial institutions to negotiate on an equal footing with financing platforms in accordance with the principles of marketization and rule of law, and to implement classified policies to resolve existing debt risks, strictly control incremental debts, and establish a normalized financial debt monitoring mechanism for financing platforms through extensions, borrowing new ones to repay old ones, and replacing them. If necessary, the People's Bank of China will also provide emergency liquidity loan support to areas with relatively heavy debt burdens. Support local governments to gradually divest the financing function of the financing platform through mergers and acquisitions, reorganization, asset injection, etc., and transform into a market-oriented enterprise that does not rely on credit and is financially independent and sustainable.
In view of this year's financial support for local debt risk-to-risk work, the People's Bank of China pointed out at the work conference that financial institutions should be guided to rationally use debt restructuring and replacement in accordance with the principles of marketization and rule of law to support the debt risk resolution of financing platforms. Wang Qing, chief macro analyst of Oriental Jincheng, told the Financial Times that next, the relevant departments will strictly control "while turning debts into new ones", and gradually establish a long-term mechanism to prevent and resolve local debt risks, including promoting the transformation of financing platforms. At the same time, it will also adhere to the principle of "developing while turning debts", by reasonably determining the target fiscal deficit rate and the amount of new local special bonds, arranging an appropriate investment scale, and giving full play to the leading role of investment in private investment, especially focusing on promoting the construction of the "three major projects" and other measures to help the stable operation of the macroeconomy.
Looking ahead to 2024, local debt risks will be effectively controlled. Recently, the yield of urban investment bonds has fallen, indicating that the market's confidence in the resolution of local debt risks has increased significantly. Wang Qing said.
Do a good job in supporting the steady development of the real estate market
Since 2023, in order to adapt to the new situation of major changes in the relationship between supply and demand in the real estate market, the People's Bank of China and other financial management departments have implemented comprehensive policies to support the stable and healthy development of the real estate market.
On the demand side, a series of policies for the optimization and adjustment of personal housing loans have been introduced to boost market demand, including the inclusion of the first housing "recognition but not loan" into the policy toolbox;Lowering the lower limit of the down payment ratio and lowering the lower limit of the interest rate for second home loansGuide the interest rate of new housing loans to decline, reduce the interest rate of existing first home loans, etc. On the supply side, we will create a special re-lending plan for real estate relief and a 100 billion yuan rental housing loan support plan, extend the implementation of the 200 billion yuan guaranteed delivery loan support plan until May 2024, and extend the implementation of the rental housing loan support plan until the end of 2024, so as to guide financial institutions to meet the reasonable financing needs of real estate enterprises under different ownership systems without discrimination.
From a practical point of view, the above measures have achieved remarkable results, which not only alleviates the short-term cash flow shortage of real estate enterprises, but also significantly reduces the cost of housing and interest burden of home buyers. According to data released by the People's Bank of China, from January to November 2023, the interest rate on newly issued personal housing loans is 41%, down 08 percentage points. More than 23 trillion yuan of existing mortgage interest rates have been lowered, with an average reduction of 073 percentage points, benefiting more than 50 million households, 1600 million people, saving about 170 billion yuan in interest expenses every year.
The work conference of the People's Bank of China called for strengthening the monitoring and analysis of the real estate market. Due to the city's policies, we will accurately implement differentiated housing credit policies, meet the reasonable financing needs of various real estate enterprises, and do a good job in the implementation of various policies such as the "16 Financial Measures" and financial support for the construction of affordable housing, the construction of public infrastructure for "level-emergency and emergency", and the transformation of urban villages. Experts said that as the effect of the "combination punch" of the real estate policy becomes more and more apparent, the market is expected to gradually recover, and the real estate industry is also expected to bottom out and stabilize.
The transformation of the real estate market has brought certain challenges, but also contains new development opportunities, and the "three major projects" that have been repeatedly mentioned in major conferences are one of them. The People's Bank of China (PBoC) recently disclosed that it has added 500 billion yuan of supplementary mortgage loans to provide medium and long-term low-cost financial support for policy-based development banks to issue loans for the construction projects of the "three major projects". Feng Lin, a senior analyst at the research and development department of Oriental Jincheng, said that with the further implementation of funds, the "three major projects" will be steadily promoted in 2024.
Promote the resolution of risks of small and medium-sized financial institutions in an orderly manner
Small and medium-sized financial institutions are an important part of China's financial system. In 2023, the financial management department will continue to promote the reform of small and medium-sized banks to reduce risks, accelerate the reform of rural credit cooperatives under the "one province, one policy", and steadily promote the reform, restructuring and risk mitigation of urban commercial banks and village and township banks. At the same time, we will encourage multiple channels to supplement the capital of small and medium-sized banks, strengthen the risk monitoring of banking institutions, supervise the classification of non-performing assets, and increase the disposal of non-performing assets. In the past three years, 20 provinces (regions) have been supported to issue 550 billion yuan of local ** special bonds, supplementing capital for more than 600 small and medium-sized banks.
After several years of reform and risk reduction, the number of high-risk small and medium-sized banks has dropped by half from the peak. In terms of quantity and asset scale, China's high-risk financial institutions account for a very small proportion of the financial system. It is understood that a small number of provinces with relatively concentrated high-risk institutions are formulating and implementing a reform plan for small and medium-sized banks to further reduce the number and level of high-risk institutions.
The work conference of the People's Bank of China called for promoting the resolution of risks of small and medium-sized financial institutions, promoting the risk disposal of key institutions, and improving the early correction mechanism with hard constraints. The People's Bank of China recently released the "China Financial Stability Report (2023)", which pointed out that in 2023, taking into account various factors such as the economic foundation and financial risk situation in various places, and on the basis of fully soliciting local opinions, we will steadily promote the expansion of the pilot project of early correction of hard constraints on incremental high-risk institutions in eight provinces and cities, and continuously promote the institutionalization and standardization of early correction of hard constraints, so as to firmly adhere to the bottom line of no systemic financial risks.
Talking about the prevention and resolution of financial risks this year, Li Peijia, a senior researcher at the Bank of China Research Institute, said that for the risk disposal of small and medium-sized financial institutions, we should continue to improve the risk monitoring, assessment and early warning mechanism for small and medium-sized financial institutions, strengthen early correction of hard constraints, and promote the merger and reorganization of high-risk small and medium-sized financial institutions in a timely manner. It is necessary to strengthen the review of the qualifications of shareholders of newly established institutions, raise the entry threshold, strengthen prior prudential supervision, and promote the establishment of a professional and high-standard corporate governance mechanism. Guide small and medium-sized financial institutions to base themselves on regional resources and industrial characteristics, make good use of the local market, take root in the local area, serve small and medium-sized enterprises, and create a new development path suitable for the operating characteristics of small and medium-sized banks.
Luo Zhiheng, chief economist of Guangdong Kai**, said when talking about the merger and reorganization of small and medium-sized financial institutions, in the process of merger and reorganization, the purpose of reorganization should be clarified, with the main purpose of resolving risks, and the treatment of non-performing assets in the process of merger and reorganization should be consideredWith the main purpose of seeking development, the current situation of the bank's development should be fully analyzed and a set of characteristic development strategies should be formulated.