IV. Underpinning Financial Institutions with Various Monetary Policy Tools to Provide Stronger Credit Support to Key Areas and Weak Sectors in the Economy
The PBC made strong efforts to encourage financial institutions to increase their support for small and micro businesses, agriculture, rural areas, and rural households, renovation of shanty towns, and other key areas and weak sectors in the economy by using tools such as central-bank lending, central-bank discounts, and Pledged Supplementary Lending (PSL). At end-June, outstanding central-bank loans for agriculture, small enterprises, and poverty alleviation, as well as central-bank discounts, posted RMB 236.0 billion, RMB 75.9 billion, RMB 142.9 billion, and RMB 140.2 billion respectively. The PSL was used to extend credit to the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China to support their lending for the renovation of shanty towns, key hydraulic projects, and projects to support overseas operations of Chinese enterprises. The PBC provided RMB 195.3 billion of PSLs to the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China during the second quarter, with outstanding PSLs posting RMB 2411.1 billion at end-June.
The reserve requirement ratio (RRR) for banks under the targeted RRR program was adjusted on a dynamic basis. In February 2017, the PBC implemented a regular assessment under the targeted RRR reduction program based on bank performance in 2016 to support agriculture and small enterprises. Most banks were assessed to have met the criteria for the annual credit supply to agriculture and small enterprises and they continued to be eligible for the preferential RRR. A number of banks that had not been covered by the program were assessed this year to have met the criteria and thus became eligible for the program. Some banks failed the assessment and were removed from the program.
V. The Structural Guidance Role of Credit Policies
The PBC continued to explore and assume the role of signaling and guiding the structure of credit policies to support economic restructuring, industrial transformation, and upgrading. To support the five major tasks of removing excess capacity, reducing stocks, deleveraging, reducing costs, and shoring up weak spots, the PBC focused on guiding financial institutions to restructure the stock of credit assets on the supply side, improve the use of new loans and transition to the new growth model, appropriately use central-bank financial support, and explore new models of organizational structures, collaterals, products, and services so as to allocate more credit resources to key areas and weak sectors of the economy, with the aim of satisfying the diversified financial demands of the people and the real economy. First, banking institutions were encouraged and guided to provide comprehensive support to build China into a manufacturing power; to continue providing proper financial services for strategic industrial restructuring, infrastructure development, and reform and development in key areas, such as shanty town renovations, underground utility tunnels, ship-building, railways, logistics, and energy; to drive industrial transformation by focusing on expanding service consumption; to guide efforts by financial institutions to make innovations in organizational arrangements, products, and service modes; and to step up financial support for new priorities in consumption, such as retirement services and healthcare. Second, financial services for agricultural-related areas and small businesses were enhanced. The PBC prudently promoted the pilot program of loans collateralized with the operational rights of contracted land and rural housing property, encouraged small-and medium-sized enterprises (SMEs) to use non-financial enterprise debt-financing instruments to raise funds, supported eligible financial institutions to issue financial bonds to extend loans exclusively to small businesses, and encouraged the development of small- and medium-sized banks and private financial institutions. Third, the PBC urged banking institutions to implement various policies to provide financial support to address overcapacity issues in the coal, steel, and coal-fired power-generation sectors. It also improved the system of policies to support green finance and stepped up efforts to develop green financing. Fourth, the PBC provided financial support to promote coordinated regional development for national strategies, which include the Coordinated Development Plan of the Beijing-Tianjin-Hebei Area, the Belt and Road Initiative, Development of the Yangtze River Economic Belt, and the Western China Development Drive. Fifth, the PBC continued to improve financial services related to the people’s livelihood, such as poverty reduction, employment, education, minority ethnic groups, migrant workers, and college graduates who have become rural officials. It boosted financial support for mass entrepreneurship and innovation and actively promoted pilot programs related to the integration of technology and finance. The PBC further promoted financial services designed to target poverty-reduction programs, strengthened the collection, distribution, and management of funds for poverty alleviation by relocation, and improved information-sharing, statistical monitoring, and evaluations of targeted poverty reduction, with the objective of promoting sound and sustainable economic and social development in poverty-stricken areas and lifting people out of poverty. Moreover, the mechanism to assess the effectiveness of guiding credit policies was improved, and the credit-asset securitization program was further promoted to revitalize the stock of credit assets.
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