At the onset of COVID-19, the People’s Bank of China (“PBC”) and other government agencies jointly issued the Notice on Further Strengthening Financial Support for Preventing and Controlling the Novel Coronavirus Pneumonia Epidemic (Yinfa No. 29 [2020]), following the decisions and arrangements of the CPC Central Committee and the State Council. The 30 measures in the Notice on monetary and credit policies and financial services provided strong support for the containment of COVID-19 and the recovery of the real economy. At present, the Chinese economy is faced with increased pressures of demand contraction, supply shocks, and waning expectations under the combined effect of the pandemic and other internal and external factors. This Notice is hereby issued to ensure effective financial support for pandemic containment and socio-economic development. The specifics are as follows.
I. Giving play to both aggregate and structural monetary policy instruments to increase financial support for the pandemic-affected sectors, businesses, and populations
1. Keep liquidity adequate at a reasonable level. We will adopt a mix of monetary policy instruments, including open market operations, standing lending facility (SLF), central bank lending and discounts, to provide sufficient liquidity, encourage financial institutions to make more loans, and keep the growth of aggregate credit stable. We will tap into the loan prime rate (LPR) reform to keep the overall financing costs of businesses stable with a slight decline and encourage financial institutions to cut profits for the benefit of the real economy. For those financial institutions that are materially affected by the pandemic, the relevant PBC branches may appropriately relax the evaluations on reserve requirement.
2. Provide differentiated financial services for sectors hard hit by the pandemic. Making effective use of the central bank lending and discount policies in support of rural development and micro and small businesses (MSBs), we will raise the corresponding lending quota when appropriate and encourage locally incorporated financial institutions to boost support for catering and accommodation, retail and wholesale, culture and tourism, and other contact-based service industries as well as other promising but (due to COVID-19) temporarily distressed industries.
We will improve information sharing with competent authorities of commerce, culture and tourism, and transportation; organize various events to improve linkage between the government, banks, and businesses; help banks improve customer acquisition, risk assessment, and risk management capabilities; and develop movable property mortgage and pledge products and unsecured loan products based on the characteristics of businesses.
3. Step up financial support for MSBs and other market entities in difficulties. We will make effective use of the inclusive loans to MSBs by providing incentive funds to locally incorporated financial institutions at one percent of the incremental outstanding balance of such loans to encourage them to maintain and increase the inclusive loans to MSBs. The support plan for unsecured inclusive MSB loans will be incorporated into the central bank lending program for rural development and MSBs, such that starting from 2022, the original quota of RMB400 billion for those loans will be available on a revolving basis and if necessary, may be further increased, to incentivize financial institutions to increase the proportion of unsecured loans and first-time borrowers.
Financial institutions should promote actively offered credits and revolving loans to better meet the financing needs of MSBs. Financial institutions are to lay down detailed and concrete rules on funds transfer pricing, tolerance for non-performing loans, due diligence, and performance assessment, and more effectively allocate credits and use financial technologies, to enhance their capacity to serve MSBs. Through medium- and long-term loans, lowered interest rates, extension or renewal of loan term, or other market-based approaches, financial institutions should proactively help the affected businesses overcome the pandemic and should not unjustifiably restrict or terminate loans or force an early repayment. Financial institutions should also work with credit reporting platforms to access the credit information they have on businesses, such as the finance, government administration, utility, and commerce records, to reduce the information asymmetry between banks and businesses and make financing more efficient.
4. Improve the quality and efficiency of financial services to priority regions and pandemic-affected populations. Financial institutions should improve the financial services on offer to the hard-hit areas by adjusting their regional financing policies and funds transfer pricing and implementing differentiated performance evaluation schemes.
For those who have been hospitalized or quarantined due to COVID-19 infection, who are under quarantine for pandemic containment, and who have temporarily lost their source of income due to the pandemic, financial institutions should promptly optimize their credit policies to separately track the capacity for repayment and the willingness to make repayment as well as the short-term impact on repayment capacity and longer-term impact on repayment capacity, and make flexible changes to the repayment plans for mortgage and other personal loans, such as appropriately deferring the repayment deadlines, extending the loan term, and postponing principal repayment. Financial institutions are also encouraged to make business loans more accessible to taxi drivers, e-commerce business owners, truck drivers, and other self-employed individuals in reference to their policies for individual businesses and MSBs.
5. Provide convenient financial market services. Financial infrastructures should further optimize issuance, trading, clearing, and settlement services; offer services through a wide range of channels; adjust the operation of some businesses; and improve service availability. The National Association of Financial Market Institutional Investors and the Shanghai Clearing House should make good use of the existing “fast tracks” to better support bond issuers severely affected by the pandemic by streamlining service procedures and moderately relaxing the disclosure requirements.
6. Ensure the availability of basic financial services. We will enhance cash management to ensure cash is adequately supplied and sanitary. We will maintain smooth operations of payment and clearing services, raise the maximum amount for the Bulk Electronic Payment System (BEPS) as necessary, and extend the operating hours of the High-Value Payment System and the Central Bank Accounting Data Centralized System, to enhance the support of electronic payment services.
For business loans, financial institutions should, if necessary, complete the approval and disbursement procedures at the nearest outlets or through videoconferencing. To protect the public’s rights in relation to credit records, financial institutions should continue to observe the rule that exempts certain COVID-19-related late payments from being reported as delinquencies. They should also ensure the accessibility of online inquiry and complaint channels for financial consumers.
We will establish a coordination mechanism between fiscal authorities, tax authorities, treasury, and banks to ensure unimpeded funds transfers and prompt disbursement of funds earmarked for COVID-19 control. Treasuries at all levels should ensure implementation of the value-added tax (VAT) credit refund policy, a relief policy for businesses. We will streamline the allocation and disbursement channels for tax refunds, to ensure businesses can receive the refunds in a prompt, accurate, and secure manner and benefit from the policy as early as possible.
II. Promoting the role of finance in keeping smooth flows in the economy and implementing the policies on financial industry’s support for the real economy
7. Provide financial assurance for food security and production and sales of key agricultural products. We will tap into the central bank lending and central bank discounts for rural development, raise the central bank lending quota when appropriate, and guide locally incorporated financial institutions to increase their support for agro-related businesses. We will develop differentiated credit policies to support all stages of grain production from spring sowing and preparation to grain purchase, storage, and processing. We will leverage the policy banks to ensure sufficient credit supply for maintaining the central grain reserves. Financial institutions are encouraged to actively participate in the market-oriented purchase of grains and to meet the financial needs of grain purchase and processing activities. The institutions should make more credit available for the production, sale, and processing of soybeans and oilseeds. There should be more financial support for the research of key agricultural technologies such as germplasm.
8. Ensure effective financial services for coal and other energy supplies. We will optimize the special central bank lending targeted for the clean and efficient utilization of coals to reasonably meet the financing needs of safe coal production, coal purchase of power producers, and coal stockpile, thereby ensuring the stable supply of coal and other energy resources. We will continue to promote the Carbon Emission Reduction Facility to support wind and photovoltaic bases and upgrade the adjacent coal-fired power plants, so as to promote our economy’s green and low-carbon transition while ensuring energy supply and security.
9. Strengthen financial support for logistics and shipping. Financial institutions should maintain contact with transportation companies to meet their financing needs, and offer “fast track” services to transportation and logistics companies with large COVID-19 control and emergency shipping tasks, so that they may enjoy simplified credit approval procedures and more flexible and convenient financial services. For those transportation and logistics companies and truck drivers that have repayment challenges due to COVID-19, financial institutions are encouraged to appropriately extend or renew the loan term. More tools such as the civil aviation emergency loan scheme should be fully employed to increase credit support to airlines and airports.
10. Enhance financial support for key enterprises in industrial and supply chains. We will set up a special central bank lending for scientific and technological innovation to provide funding for eligible scientific and technological innovation loans, and guide financial institutions to ramp up support for scientific and technological development and technological transformation of enterprises. We will establish a docking mechanism between bank credit and bond financing to encourage financial institutions to promptly respond to the financing needs of core and supporting enterprises in the industrial chain. We will also regulate supply chain finance and empower financial instruments (such as supply chain commercial bills) and accounts receivable financing platforms to facilitate the fundraising of supply chain enterprises.
11. Intensify financial support for productive investments. Development banks and policy banks should increase financing support for major investment projects in line with their business scopes. Financial institutions should actively engage in major projects, and increase support for projects that benefit people's livelihood and make up for weaknesses, such as water conservancy, transportation, pipeline and network, as well as municipal infrastructure, and the construction of new-type infrastructure, such as the fifth-generation mobile communication (5G), industrial Internet and data centers, so as to promote the commencement of new projects and produce tangible results. Financial institutions should reasonably purchase local government bonds and support local governments to moderately carry out infrastructure investment in a preemptive manner. On the premise of controllable risks and compliance with laws and regulations, financial institutions should, in accordance with the market-based principles, meet the reasonable financing needs of financing platform companies, and should not unjustifiably suspend, delay, or terminate loans, so as to ensure that the construction-in-progress proceed smoothly. Financial support for private investment, government and social capital cooperation should be ramped up. The proportion of new loans from financial institutions to provinces (regions) with slow credit growth should rise steadily.
12. Support the healthy development of private enterprises. Adhering to the "two unwavering", the PBC ensures that both the state-owned sector and the private sector implement the same financial policies, including bank lending and bond financing. Financial institutions are encouraged to work closer with private enterprises by forging medium- and long-term partnerships, setting annual service objectives, fully satisfying their reasonable financial needs, and increasing the proportion of private corporate loans in newly-issued corporate loans.
We will give play to the leading role of the National Financing Guarantee Fund, and encourage qualified regions to set up special funds for loan risk compensation or credit guarantee funds for private enterprises, which are focused on providing credit enhancement services for first-time loans, re-lending and loan renewals. We will improve the bond financing support mechanism for private enterprises and encourage financial institutions to increase bond investment in private enterprises.
13. Improve financial services in the housing sector. Adhering to the position that “housing is for living in, not for speculation” and aiming to “stabilize land price, housing price, and expectations,” we will introduce city-specific housing credit policies, including reasonable minimum down payment ratio and minimum mortgage rate of commercial individual housing within each jurisdiction, to better meet reasonable housing needs of buyers and promote the steady and robust development of local real estate markets.
To maintain an orderly and stable supply of real estate development loans, financial institutions should distinguish between project risks and conglomerate risks, increase support for high-quality projects, refrain from unjustifiably suspending, delaying, or terminating loans, or instituting a "one size fits all" policy. Commercial banks and financial asset management companies should offer effective M&A financial services for the risk resolution projects of key real estate enterprises, steadily and orderly carry out M&A loan business, strengthen the support for bond-financed M&As, and actively provide M&A financial advisory services.
On the basis of controllable risks, financial institutions should appropriately increase liquidity loans and other support to meet the reasonable financing needs of construction enterprises, and refrain from unjustifiably suspending, delaying, or terminating loans, so as to maintain the continuous and stable financing of construction enterprises.
14. Guide platform operators to offer lawful and compliant inclusive financial services. On the basis of promoting the regulated and healthy development of online financial business of platform operators, we will give full play to their positive role as financial service providers. Platform operators are supported to leverage Internet technology to further develop online financing products for specific real-world applications, so as to provide non-contact financial services to merchants and consumers through the platforms. Platform operators are also encouraged to leverage their strengths in customer acquisition, data processing, risk management, and technical know-how to increase support for first-time loans and unsecured loans in the field of agriculture, rural areas, and rural population and to MSBs. We will guide them to steadily reduce the interest rates and fees and postpone the repayment deadline for the pandemic-hit borrowers to maximize the benefits of businesses and the public. Platform operators are urged to carry out regulated business cooperation with financial institutions, and financial institutions are empowered to accelerate digital transformation and improve the efficiency and coverage of financial services.
15. Upgrade the financial services for key consumer sectors and new urban residents. We will create a special central bank lending for inclusive elderly care, provide funding for qualified inclusive elderly care loans, and increase financial support for inclusive elderly care institutions. We will guide financial institutions to develop their consumer credit products and services in a compliant manner, particularly in such areas as medical and health care, elderly and child care, culture and tourism, new consumption, green consumption, and rural consumption at county level. We will further encourage them to enrich automobile and other bulk consumer financial products to meet the funding demand for reasonable consumption.
Financial institutions should make good use of entrepreneurship secured loans, offer more credit products to new urban residents in line with the operation form, income profile, and financing needs of their businesses, help reduce their financing costs and stimulate the vitality of entrepreneurship and employment. For the new urban residents, financial institutions should proactively develop new financial products and services in the areas of consumption, vocational training, child education, health insurance, elderly care, and housing, and improve the equality and accessibility of basic financial services.
III. Improving the process of foreign exchange and cross-border RMB businesses and promoting stable development of exports and foreign trade
16. Step up facilitation for trade. We will expand the policy for facilitating trade-related foreign exchange payments and receipts of quality enterprises nationwide, steadily carry out the pilot programs for a higher-level facilitation of RMB settlement for trade and investment, and encourage banks to incorporate more quality small and medium-sized enterprises (SMEs) into the coverage of the facilitation policies. We will further broaden settlement channels, and support banks and eligible non-banking payment institutions to provide efficient and low-cost cross-border funds settlement services, based on electronic transaction information, for relevant market entities that engage in cross-border e-commerce, comprehensive foreign trade services and other new forms of trade.
17. Facilitate cross-border financing for enterprises. We will support qualified small and medium-sized high-tech and SSDI (specialized, sophisticated, distinctive, innovative) enterprises to join the pilot program on external debt facilitation quotas. We will facilitate external-debt borrowing by enterprises, and support non-financial enterprises to use one external-debt account for multiple external debts. We will support enterprises to apply online for external-debt registration. Qualified non-financial enterprises in pilot regions may process registration of external debts and other foreign exchange items under capital account directly at banks in line with the rules and regulations.
We will allow the sale and use of foreign currency-denominated loans that are domestically issued with export trading background; enterprises should, in principle, repay the loans with the foreign currency received from the exports. If due to special circumstances an enterprise could not receive the foreign-currency payments on schedule and has no foreign currency to repay such loans, the lending bank may, in line with the rules and regulations, process foreign-currency purchase for the enterprise to repay the loans. Financial institutions should actively innovate financial products for trade, improve trade financing services, and provide necessary funding support for the imports and exports of enterprises.
18. Improve exchange-rate risk management service for enterprises. Financial institutions should promptly meet the needs of foreign trade enterprises and other market entities for hedging exchange-rate risks, support enterprises to expand cross-border RMB settlement, improve management of and services for foreign exchange derivatives, and reduce enterprises’ costs for hedging risks. In areas where conditions permit, we will encourage stronger cooperation between local governments, banks and enterprises in exploring better mechanisms for sharing the costs for hedging exchange-rate risks, and in ramping up guarantees that are provided for enterprises by the governmental financing guarantee system in areas of trade financing and exchange-rate risk hedging business, so that enterprises’ resilience against exchange-rate volatility will be strengthened. China Foreign Exchange Trade System will exempt micro, small and medium-sized enterprises (MSMEs) from the transaction fees for foreign exchange derivative trading in the interbank foreign exchange market.
19. Upgrade the procedures and services for cross-border businesses. Measures will be taken to foster digitization for cross-border businesses, and banks can provide cross-border settlement services based on examining and verifying electronic documentations as well as other online paperless approaches. Banks should improve the efficiency of cross-border payments and receipts under current account for enterprises. Banks are encouraged to provide more RMB investment and financing products, so as to facilitate the use of RMB by enterprises in foreign economic and trade activities and in international cooperation.
20. Reinforce the supporting role of export credit insurance. We will give play to the role of export credit insurance in credit enhancement and protection, and guide insurers to offer robust financial services to micro, small and medium-sized foreign trade enterprises, and to further improve the claim efficiency. We will deepen the cooperation among the government, insurers, banks and enterprises. Via the application scenario of “export credit insurance policy-based financing” on the platform for cross-border financial services, more detailed and diversified background information on cross-border trade will be provided with more convenient verification services, so that foreign trade enterprises will be served in a targeted manner, and insurance policy-based financing will be scaled up.
21. Facilitate cross-border investment and financing for investors. We will promote unified market access criteria for interbank bond market and exchange bond market, streamline the listing procedures, and improve the funds management for investment in domestic bond market by overseas investors. We will optimize the funds management for domestic bond issuance by overseas institutions (panda bonds). Domestic related enterprises of panda-bond issuers may borrow the funds from relevant panda bonds under the principle of real needs. We will further facilitate qualified foreign institutional investors (QFIIs) and RMB qualified foreign institutional investors (RQFIIs) in the funds registration for domestic securities and futures investments.
IV. Strengthening Party leadership and improving long-term policy sustainability and effects of policy promotion and implementation
22. Fully leverage the guidance functions of Party building. All the organizations in the systems of the PBC and State Administration of Foreign Exchange (SAFE) and all financial institutions should take a higher political stance, align thoughts and actions with the decisions and arrangements of CPC Central Committee and the State Council, adhere to the principle of “people first, life first”, and truly take it as a major political task to coordinate COVID-19 containment with economic and social development. We should strengthen organization and leadership, ensure policy implementation, and make every effort to well deliver financial services.
23. Reinforce the sustainability of financial support. Adhering to the market-oriented and law-based principles, financial institutions should take into full consideration of profitability, loss provision, write-offs and other factors, independently review and approve loans, bear the risks by themselves, and continuously provide effective financial support. Financial institutions should prevent moral hazard, strengthen the monitoring of funds flows and risks, and ensure enterprises use funds in a compliant and reasonable manner. The organizations in the systems of the PBC and SAFE should tackle the challenges and bottlenecks for better policy implementation, proactively respond to reasonable requests of financial institutions and market entities, and improve long-standing mechanisms for policy implementation. We should enhance policy promotion through media outlets and the internet, and ensure the policies bring benefits to market entities in a timely manner.
The People’s Bank of China State Administration of Foreign Exchange
April 18, 2022
