Factbox-China rolls out sweeping interest rate cuts and other stimulus to boost weak economy By Reuters

By Summer Zhen

(Reuters) – China announced a wide range of measures on Tuesday to shore up the faltering economy, stabilize the housing sector and restore market confidence. Stocks and bonds jumped after the announcement.

Here are the key measures announced at the press conference by People’s Bank of China (PBOC) Governor Pan Gongsheng, together with Minister of the National Financial Regulatory Administration 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 loans.

Depending on the market liquidity situation later this year, the RRR may be further cut by 0.25-0.5 percentage points, Pan said.

DISCOUNT RATES

China’s central bank will cut the seven-day reverse repo rate by 0.2 percentage points to 1.5%.

Pan expects the move to push the Medium Term Lending Facility (MLF) rate down by around 0.3 percentage points, and the Prime Lending Rate (LPR) and deposit rates lower by 0.2-0.25 points percentages. Pan did not say when the moves would take effect.

REDUCTION OF EXISTING MORTGAGE RATES

China’s central bank will direct commercial banks to cut interest rates on existing mortgages by 0.5 percentage points on average to provide some relief to households.

PAYMENT HELP

China will reduce the minimum down payment rate to 15% for second home buyers nationwide, from the current 25%.

STOCK MARKET REVIVAL

The China Securities Regulatory Authority 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 share acquisitions and expansion of investment scope.

SHARE PURCHASE FINANCING

The PBOC also introduced two new tools to stimulate the capital market.

The first – a swap program with an initial size of 500 billion yuan – allows funds, insurers and brokers easier access to financing to buy shares.

The second provides commercial banks with cheap PBOC loans of up to 300 billion yuan to help finance the acquisitions and share buybacks of listed companies.

(1 USD = 7.0321 renminbi)