Li Keqiang: Use Reforms to Lower Financing Costs

Premier Li Keqiang met with PBOC head Zhou Xiaochuan and CBRC head Shang Fulin in Shanghai. They openly discussed interest rate policy.

Li Keqiang said the best way to reduce interest rates and take pressure off the PBOC would be to speed up reforms in the Shanghai free trade zone. He said to Zhou and Shang, allowing you to reduce interest rate pressure is really difficult, but you must force down rates through reform, lower the capital costs for business by letting the cross border capital flows into the country, this is the best method. The article mentions how Li has repeatedly brought up the funding costs of SMEs, such as at the July State Council meeting. (See below for the Google translation of the article.)

Rhetoric about 7.5 percent growth aside, an economic slowdown without a monetary bailout forces reform because it is the only option. The mistake some analysts are still making is they think the growth target is the top of the agenda. The reform agenda is priority one.

On the continuum of possible economic policies and outcomes, the worst are those that slow or stop the reforms. At one end is monetary stimulus, booming economy and a return to business as usual. At the other end, there may be a limit to how much pain can be inflicted before insiders reject the policies. In between, the worse the slowdown, the greater the need for reform.


"The prime minister is most concerned about, or through the FTA reform, through the region of interest rates decline, is not driven by interest rates fall outside the territory area, reducing the cost of funds of enterprises." Bank of China [0.00% funding research report ] Shanghai Branch of Bank Long Pan Yuehan "First Financial Daily" correspondent said.

September 18 afternoon, Premier Li Keqiang arrived Bank of China Shanghai Branch of the FTA inspections, investigations, when at the end of leave, down the steps and stay for a while in the car before speaking with his entourage, the FTA to , the greatest feeling FTA great development.

潘岳汉told reporters that Prime Minister Li Keqiang also told People's Bank of China Governor Zhou Xiaochuan and China Banking Regulatory Commission Chairman Shang Fulin said that let you take the pressure off interest rates is very difficult, but we must come Forced by the reform, so that the effective cross-border capital After inflows, the domestic cost of capital to accelerate down, this is the best approach.

SME financing issue has been highly current government's attention this year, Li Keqiang in primary research study, almost every time the financial support of the contents of the real economy. July's State Council executive meeting, also repeatedly referred to reduce financing costs.

July 23, the State Council executive meeting chaired by Premier Li Keqiang, identified ten initiatives to ease corporate financing problems, and asked relevant departments should pay close attention to the development of the implementation of supporting measures, regular supervision and inspection, the introduction of third-party assessment to ensure that policies are implemented as soon as possible, see results.

Panyue Han told reporters, Premier Li Keqiang on the current interest rate of decline since the free trade area in general is quite satisfactory. "Overall in the region because of low interest rates of 18% to 20% higher than outside the region, at around 5 percent, but he believes there is room fell With reform, the interest rate could decline further."

As a result,潘岳汉said Premier Li Keqiang said that this feeling comes from the largest free trade area is to solve the problem of high interest rates outside the region, the key mechanism by Forced reform, through cross-border renminbi effective penetration of funds, lower interest rates.

To control risk, currently in Shanghai since foreign trade zone in the region and territory, and build the corresponding firewall. How to transfer to the region through the region of interest rates decline, the 潘岳汉 said that in the year to explore free trade zone, has formed some good experience: First, funds can effectively penetrate the second is money coming in can really use in the real economy.

"People's Bank through financial regulation and cross-border yuan requires the use of terms, which should be able to do, I want to moderate the inflow of funds outside the region through effective penetration, low-interest financing in the amount of the increase in cases, outside the region will be a gradual decline in interest rates still. "Panyue Han said.

From the current situation, the overall rates Shanghai Free Trade Area in the region compared to last year, but also to achieve a decline. Meanwhile, Pan Yuehan that there is further decline in interest rates in the region of space.

How to achieve a further decline in interest rates in the region? Panyue Han told reporters, still want to increase the variety of tools for enterprise financing. For example, can allow enterprises to issue bonds, because the price of bonds is less than the loan; such innovative tools that can?

In the first half of this year, Bank of China with corporate and regulatory innovation Customs, open to the enterprise tax guarantees, tax guarantee the guarantee fee thousandth thousandths. "We had more than 40 million tax bond, but also for enterprises to save the cost of 130 million yuan."

As another example, 潘岳汉 that speed by accelerating the use of corporate funds, reduce standby pay of corporate funds in the capital efficiency, the cost will be further reduced. "So I think that is not simply to reduce the cost of financing loans to Dinglao, the key is to enrich the product, rich in financial services, improve capital efficiency of enterprises, reducing the overall cost of business."

In addition, 潘岳汉 also told reporters, in addition to interest rates, the Prime Minister also concerned about the issue, one can not really finance the real economy, services for SMEs, reduce financing costs; Second, multinationals can really become invested in Shanghai , management, operations, research and development center.

"The prime minister concerned business cash flow efficiency can be further improved, he asked us after the FTA funds pool capital efficiency has not improved, I say that we are improving, he said, but had to continue to further increase his capital items also concerned whether under the pilot can truly serve the real economy, rather than the sizzling money. "潘岳汉 said that in these areas, Premier Li Keqiang have made requests to the banks and enterprises cooperation, the pilot test well.

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