Li Yunze stated that the national plan to increase the core tier-one capital of six major commercial banks will be implemented in an orderly manner following the approach of "coordinated advancement, phased implementation, and tailored strategies for each bank." He mentioned, "Financial asset investment companies under major commercial banks have already met the conditions to expand the pilot program. We will collaborate with relevant departments to study expanding the pilot scope from the original Shanghai to 18 other large and medium-sized cities with active technological innovation, such as Beijing. We will appropriately relax restrictions on equity investment amounts and ratios, increase the proportion of on-balance-sheet investments from the original 4% to 10%, and raise the proportion of investment in a single private equity fund from the original 20% to 30%. We will guide relevant institutions to implement the requirement of due diligence exemption and establish a long-term, differentiated performance assessment system." On September 24, Li Yunze, the director of the State Financial Regulatory Administration, made these remarks at a press conference held by the State Council Information Office.
Since 2024, risk prevention, strengthened regulation, and promotion of development have been the three main tasks of financial regulation. Li Yunze indicated that in terms of risk prevention, efforts have been focused on key areas to advance risk resolution and promote the reform and risk resolution of small and medium financial institutions, resolutely avoiding the spillover and transmission of risks. Currently, regions with a concentration of high-risk institutions have all formulated specific reform and risk resolution plans, which are being implemented in a prudent and orderly manner according to the "one province, one policy" approach.
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"At the same time, we are also guiding banks and insurance institutions to actively cooperate in resolving risks related to real estate and local government debt. At present, China's financial industry, especially large financial institutions, is operating steadily with controllable risks. With the gradual resolution and mitigation of the three major risks of real estate, local debt, and small and medium financial institutions, financial risks are steadily converging, and we are firmly maintaining the bottom line of not allowing systemic financial risks to occur," Li Yunze stated.
In terms of strengthened regulation, Li Yunze said that the approach is to address both symptoms and root causes, using reforms to solve difficult problems and systems to promote standardization, thereby continuously enhancing the industry's sustainable development capabilities. The banking and insurance industries are being guided to return to their origins and focus on their main businesses, achieving differentiated development and complementary advantages. Efforts are being made to introduce new "national ten articles" for the insurance industry, promptly improve asset management regulations, continuously strengthen the governance of non-bank institutions, optimize and consolidate credit foundation management, and promote the resolution of deep-seated issues that restrict the sustainable and healthy development of the industry.
In terms of promoting development, Li Yunze expressed the need to focus on unblocking bottlenecks and improving the compatibility of the economy and finance, and to increase financial services to key areas and weak links. As of the end of August 2024, loans to high-tech industries and long-term loans to the manufacturing industry have grown by 13.2% and 15.9% year-on-year, respectively; inclusive small and micro enterprise loans and private enterprise loans have grown by 16.1% and 9.1% year-on-year, respectively. In the first eight months of 2024, the insurance industry has paid out a total of 1.55 trillion yuan, a year-on-year increase of 26.1%.
Increasing capital for the six major banks and expanding the equity investment pilot
Major commercial banks are the main force in China's financial system for serving the real economy and are also the ballast stone for maintaining financial stability, with stable asset quality and main regulatory indicators within a "healthy range."
Li Yunze said that after research, the state plans to increase the core tier-one capital of the six major commercial banks, which will be implemented in an orderly manner following the approach of "coordinated advancement, phased implementation, and tailored strategies for each bank." There will also be continuous supervision to promote large commercial banks to improve their refined management level and strengthen their high-quality development capabilities under capital constraints.Capital is the "principal" for the operation of financial institutions, the foundation for enhancing the ability to serve the real economy, and a barrier against risks. "In recent years, large commercial banks have mainly relied on retaining their own profits to increase capital. However, as the intensity of banks' fee reduction and benefit concession continues to increase, the net interest margin has narrowed, and the profit growth rate has gradually slowed down. It is necessary to coordinate various internal and external channels to enrich capital," explained Li Yunze.
Additionally, in the current total social financing, indirect financing still occupies the main position, which also means that a development path with Chinese characteristics in technology finance, especially in science and innovation investment, needs to be explored. "In the early stage, financial asset investment companies established by large commercial banks have carried out equity investment pilots in Shanghai, explored paths, and have already met the conditions for expanding the pilot. According to the relevant arrangements of the State Council, to effectively play the leading and driving role of the pilot and encourage the development of venture investment, we plan to take the following three measures to promote it," said Li Yunze.
First, expand the scope of pilot cities. In conjunction with relevant departments, the pilot scope will be expanded from the original Shanghai to 18 large and medium-sized cities with active technological innovation, including Beijing. Second, relax restrictions. Appropriately relax the restrictions on the amount and proportion of equity investment, increase the proportion of on-balance-sheet investment from the original 4% to 10%, and increase the proportion of investment in a single private equity fund from the original 20% to 30%. Third, optimize assessment. Guide relevant institutions to implement the requirements of due diligence exemption, and establish a long-term, differentiated performance assessment. Next, summarize experience in a timely manner, continue to study the expansion of the scope of pilot cities; at the same time, continuously optimize supporting policies to promote more projects to be implemented as soon as possible.
Real estate development loans achieve positive growth
In recent years, there have been significant changes in the supply and demand relationship in China's real estate market. The continuous slowdown in sales has led to tight liquidity for real estate companies, and some sold and under-construction projects are difficult to deliver on time. To solve this problem, the National Financial Supervision and Administration Commission and the Ministry of Housing and Urban-Rural Development have established a city real estate financing coordination mechanism.
In Li Yunze's view, the biggest feature of this mechanism is "city-based, project-centered", distinguishing the risks of real estate company groups from the construction of real estate projects, giving full play to the overall coordination role of local governments, including compliant under-construction and sold projects in the project "white list", and guiding financial institutions to meet the reasonable financing needs of real estate projects.
Li Yunze said that so far, commercial banks have approved more than 5,700 "white list" projects, with approved financing amounts reaching 1.43 trillion yuan, supporting the delivery of more than 4 million housing units on schedule. By the end of August, the real estate development loans in 2024 had achieved positive growth compared to the beginning of the year, reversing the downward trend of real estate development loans. Mergers and acquisitions loans and housing rental loans in the real estate sector also increased by 14% and 18%, respectively.
Li Yunze also stated that the next step will be to resolutely implement the decisions and deployments of the Party Central Committee and the State Council on real estate work, further promote the implementation of the city real estate financing coordination mechanism, and truly achieve "should enter, should enter", "should lend, should lend", "should release, should release", resolutely win the battle to ensure housing delivery, and promote the stable and healthy development of the real estate market.
Cultivate and expand insurance patient capital
Insurance companies are important institutional investors in the capital market. Recently, the State Council issued "Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting High-Quality Development of the Insurance Industry", which mentioned improving the quality and efficiency of the insurance industry's service to the real economy, focusing on major national strategies and key areas, serving scientific and technological innovation and the construction of a modern industrial system, and giving play to the advantages of long-term investment of insurance funds.Li Yunze stated that insurance funds are characterized by their large scale, long-term nature, and stable sources, and inherently possess the attributes of patient capital, which will undoubtedly become an important value investor in supporting the healthy and sustained development of the capital market.
"The capital market undoubtedly plays a significant role in financial stability and economic development. We have always attached great importance to the capital market and actively guided banks, insurance companies, and asset management institutions to maintain its stability. Previously, with the approval of the State Council, we promoted China Life and New China Life to carry out pilot projects, jointly initiated the establishment of a private securities investment fund, and raised insurance funds to invest in the capital market. The fund has a registered capital of 50 billion yuan and has officially started investment operations, which is currently progressing smoothly," Li Yunze said.
Li Yunze also expressed that there will be continued support for the sustained and stable development of the capital market. First, expand the reform pilot of long-term investment of insurance funds, support other eligible insurance institutions to establish private securities investment funds, and further increase investment in the capital market. Second, supervise and guide insurance companies to optimize the assessment mechanism, and encourage and guide insurance funds to carry out long-term equity investments. Third, encourage wealth management companies and trust companies to strengthen the construction of equity investment capabilities, issue more long-term equity products, actively participate in the capital market, and cultivate and expand patient capital through multiple channels.
The person in charge of PICC Assets stated that PICC Group will closely follow the direction encouraged by national policies, focus on serving the "five major articles," and further support economic stable growth by participating in infrastructure construction and revitalizing existing assets through project investment. They are determined to transform high-quality development, innovate and develop ABS (Asset-Backed Securities) business, make good use of policy tools, and appropriately increase the overall scale of stock configuration. Actively implement long-term assessment orientation to reflect the positioning of patient capital in insurance funds.
The person in charge of China Life stated that they will leverage the long-term investment advantages of insurance funds, focus on national major strategies and key areas, improve the quality and efficiency of serving the real economy, and help serve scientific and technological innovation and the construction of a modern industrial system.
New China Life Insurance stated that in terms of the use of insurance funds, they have the following measures around doing a good job as "patient capital": First, inject stable funds into the capital market through long-term investments. For example, the pilot fund with a total scale of 50 billion yuan jointly initiated by New China Life Insurance and China Life aims to achieve capital appreciation through long-term investments; Second, optimize the direction of funds to support the real economy, with the company's investment scale in serving the real economy exceeding 920 billion yuan in the first half of the year; Third, innovate investment methods and expand investment fields. Explore investment opportunities around new quality productive forces and support the development of high-quality new quality productive force enterprises. As of June 30, 2024, the investment balance is approximately 41.8 billion yuan.