The People's Bank of China has recently introduced a series of substantial monetary policy adjustments aimed at further bolstering stable economic growth. Specifically, these measures include a reduction in the reserve requirement ratio, a lowering of policy interest rates, a decrease in existing mortgage rates, and the introduction of innovative monetary instruments to enhance the stability of the stock market.

Reduction in the Reserve Requirement Ratio:

The central bank has reduced the reserve requirement ratio by 0.5 percentage points, injecting approximately 1 trillion yuan in long-term liquidity into the financial market. Additionally, if liquidity conditions require, an additional reduction of 0.25 to 0.5 percentage points may be implemented later in the year.

Interest Rate Reduction:

The central bank has also lowered the policy interest rate for the seven-day reverse repurchase operation by 0.2 percentage points, from 1.7% to 1.5%. This measure aims to drive down quoted loan and deposit rates in the market, while ensuring stability in the net interest margins of commercial banks.

Reduction in Existing Mortgage Rates:

The central bank is guiding commercial banks to reduce existing mortgage rates to levels comparable to newly issued loans, with an anticipated average reduction of approximately 0.5 percentage points. Moreover, the minimum down payment ratios for first and second homes have been standardized, with the national minimum down payment for second homes lowered from 25% to 15%.

Innovative Monetary Instruments:

Supporting the Stock Market: In addition to the above measures, the central bank has introduced two novel monetary policy tools designed to support stock market stability:

1. Securities, Fund, and Insurance Company Swap Facility: Eligible securities, fund, and insurance companies may utilize their held assets, such as bonds, stock ETFs, and components of the CSI 300 Index, as collateral to obtain high-liquidity assets like government bonds from the central bank. This initiative aims to significantly enhance these institutions' liquidity and capacity for stock acquisitions, with an initial operation scale of 500 billion yuan.
2. Stock Repurchase and Increased Holding Re-lending: Furthermore, the central bank is encouraging commercial banks to extend loans to publicly listed companies and major shareholders for stock repurchases and share increases. The People's Bank of China will issue re-lending to commercial banks at a rate of 1.75%, with an additional 0.5 percentage points added when banks provide loans to clients, resulting in a final rate of 2.25%. The initial allocation for this initiative is set at 300 billion yuan.

Overall, the introduction of these measures marks a significant breakthrough in the monetary policy framework of the People's Bank of China. They not only provide increased liquidity support to the real economy but also represent an innovative application of monetary policy tools to directly stabilize the capital markets. As a result, these initiatives are crucial for boosting market confidence and promoting high-quality economic growth.