By Summer Zhen and Clare Jim
(Reuters) -China announced a broad range of stimulus measures on Tuesday to support the faltering economy, stabilise the housing sector and restore market confidence. Stocks and bonds jumped after the announcement.
Here are the key measures announced in the press conference by People's Bank of China (PBOC) Governor Pan Gongsheng, alongside National Financial Regulatory Administration Minister Li Yunze and China Securities Regulatory Commission (CSRC) Chairman Wu Qing:
RRR CUT
China's central bank will cut banks' reserve requirement ratio (RRR) by 50 basis points in the near future, freeing up about 1 trillion yuan ($142.21 billion) for new lending.
Depending on the market liquidity situation later this year, the RRR may be further lowered by 0.25-0.5 percentage points, Pan said.
RATE CUT
China's central bank will cut the seven-day reverse repo rate by 0.2 percentage points to 1.5%.
Pan expects the measure will guide the medium-term lending facility (MLF) rate lower by about 0.3 percentage point, and the loan prime rate (LPR) and deposit rates lower by 0.2-0.25 percentage point. Pan did not specify when the moves would come into effect.
Pan expects the impact of the rate cuts on banks' margins to be neutral.
REDUCTION IN EXISTING MORTGAGE RATES
China's central bank will guide commercial banks to reduce the interest rates on existing mortgages by 0.5 percentage point on average, in order to provide some relief to households.
Pan expects the move will benefit around 50 million households which will pay 150 billion yuan less in interest a year.
LOWER DOWN PAYMENT
China will lower the minimum down-payment ratio to 15% for second-home buyers national-wide, from current 25%.
RELENDING LOAN FACILITY
The PBOC will allow commercial banks to use 100% from the 300 billion yuan relending loan facility to finance loans they offer to state-owned firms for acquiring unsold flats for affordable housing, up from 60% now.
On top of using special purpose bonds for buying idle land, it will consider allowing policy banks and commercial banks to provide lending for good quality corporates to acquire land from developers. The PBOC will also provide relending loans "when necessary".
REVIVING STOCK MARKET
China's securities regulator will issue guidance for medium and long-term funds to enter the market, and measures to promote mergers, acquisitions and reorganizations.
The CSRC will further support China's state fund Central Huijin Investment in stock purchases and expanding investment scope.
The CSRC will optimise the registration of equity-focused fund products and promote the innovation of broad-based exchange-traded funds (ETFs) and other index products.
FUNDING FOR STOCK PURCHASE
The PBOC has also introduced two new tools to boost the capital market.
The first - a swap programme with an initial size of 500 billion yuan - allows funds, insurers and brokers easier access to funding in order to buy stocks.
The second provides up to 300 billion yuan in first batch cheap PBOC loans to commercial banks to help them fund listed companies' share purchases and buybacks.
($1 = 7.0321 Chinese yuan renminbi)