China Stabilizes the Market and Expectations: Financial Policies Take Further Action

2025-05-15

On May 7, 2025, the State Council Information Office held a press conference, where the heads of China's three major financial regulatory bodies introduced a package of financial policies aimed at supporting market stability and expectations. The newly introduced policies are summarized as follows:

Monetary Policy:

The reserve requirement ratio (RRR) will be reduced by 0.5 percentage points, which is expected to provide approximately RMB 1 trillion in long - term liquidity to the market.
The RRR for auto finance companies and financial leasing companies will be temporarily reduced from the current 5% to 0%.
The policy interest rate will be lowered by 0.1 percentage points, meaning the 7 - day reverse repo operation rate in the open market will be reduced from the current 1.5% to 1.4%. This is expected to bring down the Loan Prime Rate (LPR) by approximately 0.1 percentage points.
The interest rate for structural monetary policy tools will be reduced by 0.25 percentage points.
The interest rate for personal housing provident fund loans will be lowered by 0.25 percentage points, with the rate for first - time homebuyers' loans over five years decreasing from 2.85% to 2.6%, and other tenors adjusted accordingly.
The quota for re - loans supporting technological innovation and technological transformation will be increased by RMB 300 billion, from the current RMB 500 billion to RMB 800 billion, to continuously support the implementation of the "two new" policies.
A RMB 500 billion "Re - loan for Service Consumption and Elderly Care" will be established to guide commercial banks to increase credit support for service consumption and elderly care.
An additional RMB 300 billion in re - loan quotas will be provided to support banks in expanding loans to agriculture - related, small - and - micro, and private enterprises.
In addition, the central bank has proposed measures to optimize monetary policy tools supporting the capital market and innovate risk- sharing tools for science and technology innovation bonds.

Financial and Insurance Policies:

Accelerate the introduction of a series of financing systems compatible with the new real estate development model to help continuously consolidate the stable situation in the real estate market.
Further expand the pilot scope of long - term investments by insurance funds, with an additional RMB 600 billion to be approved in the near future to bring more incremental funds into the market.
Adjust and optimize regulatory rules by further reducing the risk factor for stock investments by 10%, encouraging insurance companies to increase their market participation.
Promptly introduce a package of policies to support financing for small and micro - enterprises and private enterprises, to deepen and solidify the financing coordination mechanism, and to help stabilize enterprises and the economy.
Formulate and implement a series of policies and measures to support the development of foreign trade in the banking and insurance industries, providing precise services to market entities most affected by tariffs, and fully assisting in stable operations and market expansion.
Revise and introduce management methods for merger and acquisition loans to promote faster industrial transformation and upgrading.
Expand the entities eligible to initiate financial asset investment companies to qualified national commercial banks to increase investment in science and technology - innovative enterprises.
Formulate opinions on high - quality development of science and technology insurance to better play the role of risk - sharing and compensation, and to provide strong support for science and technology innovation.

Capital Market Policies:

The central bank will fully support the Central Huijin Company to play the role of a quasi - "stabilization fund" and to consolidate the market's positive recovery trend.

Measures to deepen the reform of the STAR Market and the Growth Enterprise Market will be introduced to further enhance the inclusiveness and adaptability of the system in terms of market hierarchy, review mechanism, and investor protection, and to quickly promote the implementation of typical cases.

The newly revised "Measures for the Administration of Material Asset Restructuring of Listed Companies" and related regulatory guidance will be released as soon as possible to better leverage the main channel role of mergers and acquisitions in the capital market.

Vigorously develop science and technology innovation bonds, optimize the issuance and registration process, improve credit - enhancement support, and provide comprehensive and "relay - style" financial services for science and technology - innovative enterprises.

Issue and implement the "Action Plan for Promoting the High - Quality Development of Public Mutual Funds" to guide listed companies to improve governance and performance, continuously enhance investor returns, and in coordination with all parties, continue to increase the scale and proportion of various medium - and - long - term funds entering the market, and strongly promote the entry of medium - and - long - term funds.

Regarding the widespread market concern about the impact of U.S. tariff increases on Chinese foreign - trade enterprises, relevant officials stated that a series of policies and measures to support the development of foreign trade in the banking and insurance industries will be formulated and implemented. In line with market - oriented and rule - of - law principles, continuous financial support will be provided. Specifically:

Strengthen financial relief by expanding the financing coordination mechanism to all foreign - trade enterprises, urging banks to quickly implement various policies to stabilize foreign trade, and ensuring that loans and renewals are fully provided. For market entities significantly affected by tariffs and temporarily facing difficulties in operations, "one - enterprise - one - policy" precise services will be provided.
Increase efforts to stabilize exports by optimizing regulatory policies for export credit insurance, enhancing underwriting capacity, offering preferential rates, and implementing quick - claim and pre - claim mechanisms. Urge institutions to provide financial services in key areas such as cross - border e - commerce and overseas warehouses, support the development of specialized insurance, and guide banks to launch comprehensive and one - stop services to support the development of new foreign - trade models.
Assist in expanding domestic sales by strengthening financing support for foreign - trade enterprises to switch from exports to domestic sales, guiding the establishment of a "Domestic Trade Insurance Syndicate," introducing specialized products, and promoting the expansion and increase of domestic trade insurance.

Some media have inquired whether the opening - up of China's capital market to the outside world will be affected by the current trade - tense situation. In response, the head of the China Securities Regulatory Commission (CSRC) stated that in the next stage, the CSRC will unswervingly promote the high - level opening - up of the capital market and steadily introduce a series of pragmatic measures for opening - up.

Continuously expand institutional opening - up by further optimizing access services for qualified foreign investors. Support qualified foreign - funded institutions in applying for securities and fund investment consulting business qualifications. Encourage foreign investment institutions to set up RMB funds investing in China in accordance with regulations.
Further enrich product supply by promoting the opening - up of futures and options to qualified foreign investors, supporting domestic and foreign futures exchanges to expand cooperation on commodity futures settlement price authorization. Include REITs in the scope of the Shanghai - Shenzhen - Hong Kong Stock Connect.
Deepen market opening - up by streamlining and optimizing the filing mechanism, process, and related elements for overseas listings, and improving the quality and efficiency of overseas listing filings.
Strengthen bilateral and multilateral cross - border regulatory cooperation by further enhancing cooperation in securities and audit supervision, safeguarding the legitimate interests of enterprises in overseas markets, and creating conditions to support the return of high - quality Chinese - concept stocks to the mainland and Hong Kong stock markets, while protecting the legitimate rights and interests of investors.

On the same day as the press conference, there was also new progress in China - U.S. economic and trade relations. On the morning of May 7, the Chinese Ministry of Foreign Affairs announced that Politburo Standing Committee member and Vice Premier He Lifeng will visit Switzerland from May 9 to 12. During the visit, Vice Premier He Lifeng, as the Chinese lead negotiator for China - U.S. economic and trade talks, will hold talks with U.S. Treasury Secretary Bessent. Subsequently, a spokesperson for the Chinese Ministry of Commerce said that based on full consideration of global expectations, Chinese interests, and the calls from the U.S. business community and consumers, China has decided to agree to engage in contact with the United States.

We will closely monitor the implementation of relevant financial policies and the latest progress in China - U.S. economic and trade consultations, and provide timely interpretation for you.

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