The Financial Work Order Of 2021 Will Be Clarified By The Two Sessions Of The NPC And CPPCC

The annual two sessions of the National People's Congress and the people's Congress of the people's Republic of China were opened once again, and the main axis of financial work in 2021 was clarified once again.

The 2021 government work report released on March 5 did not mention interest rate reduction and reserve ratio reduction, but stressed that the prudent monetary policy should be flexible, accurate, reasonable and moderate, and the active fiscal policy should be improved in quality, efficiency and sustainability. Industry insiders believe that this means that the scale of social financing and broad money move closer to nominal GDP growth to stabilize macroeconomic leverage.

In addition, the government work report has put forward requirements for the growth rate of inclusive small and micro enterprises loans of large commercial banks for three consecutive years, which is more than 30% this year. In order to reduce the financing cost of entities, it is clear for the first time that "optimizing deposit interest rate regulation" and innovating supply chain financial service mode.

The report points out that financial holding companies and financial technology supervision should be strengthened to ensure that financial innovation is carried out under the premise of prudent supervision. Financial institutions should stick to the duty of serving the real economy. Some people in the industry said that this may mean that the task of financial risk prevention still needs to be continued, including the macro leverage ratio did not fall but increased last year, the government debt risk has not been really solved, the bank's high-risk institutions have not been rectified, the new asset management regulations are still in the transitional period, and many problems such as Internet financial risk and anti-monopoly are still to be solved.

Stable leverage: while supporting entities, asset prices should not be too high

From the central economic work conference to this year's two sessions, stabilizing leverage has always been one of the themes.

The 2021 government work report points out that a stable monetary policy should be flexible, accurate, reasonable and moderate. We should put service to the real economy in a more prominent position and handle the relationship between economic recovery and risk prevention. The growth rate of money supply and social financing scale basically matches the growth rate of nominal economy, and the liquidity is reasonable and sufficient, and the macro leverage ratio is basically stable. Keep the RMB exchange rate basically stable at a reasonable and balanced level.

As for fiscal policy, the government work report points out that positive fiscal policy should improve quality, efficiency and sustainability. This year, the deficit ratio is planned to be about 3.2%, which is lower than that of last year. It is planned to arrange 3.65 trillion yuan of local government special bonds.

In order to hedge against the impact of the new epidemic, the scale of social financing increased by 13.3% last year, and M2 increased by 10.1%, significantly higher than the economic growth. Affected by this, according to the data released by the National Laboratory of Finance and development in February this year, China's macro leverage ratio will increase to 270.1% in 2020, an increase of 23.6 percentage points over the previous year. Among them, the leverage ratio of non-financial enterprise sector will increase by 10.4%.

Qu Hongbin, HSBC's chief economist for Greater China, believes that the tightening of fiscal policy is more moderate than market expectations. The amount of special debt (3.65 trillion yuan) and the budget deficit ratio (3.2%) are actually higher than expected by the market. In terms of monetary policy, in view of the difficulties and uncertainties in the economic recovery, policy makers reiterated that they would not make a sharp turn and would focus on the balance between promoting growth and preventing risks. In terms of the total amount, the growth rate of social finance and M2 will decline, but it will remain relatively abundant, and the one-year LPR may remain at the level of 3.85%. Like the fiscal policy, we believe that the central bank will also be committed to increasing credit support for small and medium-sized enterprises and private economy, such as stipulating that large commercial banks will increase loans for small and micro enterprises by more than 30% (only slightly lower than the target of 40% last year), and continue the policy of extending the policy of extending the loan repayment to small and micro enterprises.

"The central government's policy objective is clear: to pursue growth on the premise of preventing systemic risks, and not to pursue excessive growth." Wang Dan, chief economist of Hang Seng China, believes that macro policy will be normalized in 2021. Fiscal spending is not as strong as last year, which means that government led investment will be weakened. Money supply will also be tight relative to last year. The real estate market policy continues the past few years of "housing speculation".

According to the government work report, GDP is expected to increase by more than 6%. First, it is possible to smoothly connect with the future goal; second, it is to focus on promoting high-quality development. In this case, whether the leverage ratio which has been greatly increased last year can be appropriately reduced, and whether the disposal of hidden debts of local governments is accelerated, the answer is that the supporting monetary policy is more tight, and the liquidity will not be as loose as last year.

Assisting small and micro businesses: Supervision of deposit interest rate and supply chain finance

This year's government work report requires that loans to small and micro enterprises granted by large commercial banks will increase by more than 30%. Previously, in 2018 and 2019, it was clear that the growth rate of loans for small and micro enterprises was higher than the average growth rate of various loans, and the growth rate of loans for inclusive small and micro enterprises of large commercial banks was higher than 40%.

According to the CBRC data, by the end of 2020, the balance of loans for inclusive small and micro enterprises in China was 15.3 trillion yuan, with a growth rate of more than 30%. Among them, five large banks increased by 54.8%.

"Banks will continue to invest heavily in operating loans." A person from a major bank said that after one or two years of implementation of operating loans, banks have a strong demand, and they have begun to adopt the Internet loan model, but they will still strictly check to avoid the problem of operating loans flowing into the real estate market.

In recent years, the core direction of financial policy is to dredge the transmission chain of monetary policy and solve the problems of financing difficulty and high financing cost of small and medium-sized enterprises. It is worth noting that the emphasis of policies has been different over the years. In 2021, the government work report clearly defined "optimizing deposit interest rate regulation" and innovating the supply chain financial service mode; in 2020, in addition to profit sharing, the government work report required to use financial technology and big data to reduce service costs and significantly reduce the coverage rate of government financing guarantee.

As the interest margin of commercial banks has decreased significantly, the deposit interest rate as the liability side of the bank is the premise of reducing the loan interest rate. Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said at the press conference of the office of the State Council of the people's Republic of China, the interest rate of loans is more than the interest rate of loans. It is estimated that the interest rate of loans will rise again this year and may be adjusted. However, in general, the interest rate is still relatively low.

It is also worth noting that supply chain finance is also included in the government work report for the first time. Prior to this, the supervision has issued a series of supply chain finance related policies. In July 2019, the CBRC issued the guiding opinions on promoting the supply chain finance to serve the real economy, and in September 2020, the central bank and other eight ministries and commissions issued the opinions on standardizing the development of supply chain finance and supporting the stable circulation and optimization and upgrading of the supply chain industrial chain.

However, the prevention of supply chain financial risk is the top priority. Some regulators told the media that the central bank and relevant departments will issue supporting operating rules, but the operating rules will involve the issue of risk prevention, so it needs a certain time to demonstrate, and it will be mature to introduce one after another.

Strict supervision: capital constraint assessment of financial holding company and mutual fund company went online

The central economic work conference mentioned that "we should take anti-monopoly and curbing the disorderly expansion of capital as the focus of work in the next stage". This year's government work report also mentioned the need to "strengthen anti-monopoly and prevent disorderly expansion of capital".

Specific to the financial industry, after November 2020, the supervision of financial holding companies and Internet finance is still continuing. One of the core issues of supervision is the capital adequacy ratio, the regulatory indicator of Basel Accord.

The regulation also puts forward capital constraints on Internet Financial platforms, but gives a transitional period. "In terms of capital, we require internet platforms to have the same capital adequacy ratio as long as they do the same financial business. However, considering historical reasons, we have given them a transitional period. Some projects will be completed by the end of this year, others will be by the end of next year, and we can even study for a longer period. " On March 2, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said that all institutions should be subject to capital constraints.

In September 2020, the State Council issued the decision on the implementation of access management of financial holding companies, and the central bank issued the Trial Measures for supervision and management of financial holding companies simultaneously. Since then, the 2021 annual working meeting of the "one bank, two sessions" has proposed strict supervision requirements on Internet finance, requiring that financial activities be fully regulated according to law, and that similar businesses and entities are treated equally. We will resolutely curb monopoly and unfair competition, and prevent the disorderly expansion and savage growth of capital in the financial sector.

Deputies to the National People's Congress proposed to further enhance the legislative level of financial holding companies. On March 4, Bai Hexiang, deputy to the 13th National People's Congress and President of Guangzhou Branch of the people's Bank of China, suggested that the "Trial Measures for the supervision and management of financial holding companies" belong to departmental rules and regulations, and the level of legislation is relatively low. Financial groups formed by cross industry investment and holding by financial institutions have not yet been included in the scope of regulation. In reality, there is a situation that financial institutions are strong while financial holding companies are weak. For example, it is difficult for financial holding companies to master the data and information of financial institutions, and it is difficult to achieve accounting consolidation and risk consolidation. Therefore, it is imperative to formulate the financial holding company law.

Risk prevention: financial institutions should stick to the duty of serving the real economy

The year 2020 is the closing year of the "three major battles". Among the 267 words that reflect the results of the closing, 144 words are targeted poverty alleviation, 72 words are environmental governance, and 28 words are financial risk prevention - "safely resolve the debt risk of local governments, and timely handle a number of major financial risk hidden dangers".

For 2021, the government work report points out that financial holding companies and financial technology supervision should be strengthened to ensure that financial innovation is carried out under the premise of prudent supervision. We should improve the working mechanism of financial risk disposal, compact the responsibilities of all parties, and firmly hold the bottom line of no systemic risk. Financial institutions should stick to the duty of serving the real economy.

"This may mean that the task of financial risk prevention will continue." A person from the head office of a joint stock bank said that the macro leverage ratio did not drop but increased last year, the government debt risk has not really been solved, the bank's high-risk institutions have not been rectified, the new asset management regulations are still in the transitional period, and the Internet financial risk and Anti-monopoly problems are still continuing.

As for the battle to prevent and resolve financial risks, Guo Shuqing said that the financial leverage ratio has decreased significantly, and the blind expansion of financial assets has been fundamentally reversed. The proportion of idle intra-bank assets in the financial system decreased significantly. In addition, shadow banks were dismantled in an orderly manner, with a pressure drop of about 20 trillion yuan compared with the historical peak. The trend of real estate financialization and bubble has been curbed, and the growth rate of real estate loans in 2020 is lower than that of various loans for the first time in eight years. The incremental risk of local government implicit debt has been basically controlled, and the resolution of stock risk is advancing in an orderly manner.

For the rectification of high-risk institutions, a number of financial regulators have been taken over or controlled, and the term of taking over will expire by the middle of this year. After Anbang insurance and the contractor bank, on July 17, 2020, the CIRC took over according to law, and entrusted six market institutions to custody Huaxia life insurance, Tian'an property insurance, Tian'an life insurance, Yi'an property insurance, new era trust and Xinhua trust; the CSRC entrusted four institutions to trust new era securities, Guosheng Securities and Guosheng futures with a term of one year. In December 2020, Sichuan banking and Insurance Regulatory Bureau, together with the local government, dispatched a regulatory working group to control Sichuan trust. CCB trust will manage the daily operation and management of Sichuan trust.

As for the rectification of asset management business, the central bank issued a notice in July 2020, considering the impact of the new crown epidemic, the transformation of asset management business norms of financial institutions is facing greater pressure, and the transition period of the new regulation is extended to the end of 2021. In addition to bonds and non-standard products, traditional financial assets also include a large number of industrial funds, perpetual bonds, preferred stocks and secondary capital bonds that lack liquidity. The person in charge of the asset management department of a major bank once told reporters that the old products of the bank exceeded 1 trillion yuan, of which about one fifth of the bank's non-standard products did not comply with the new rules of asset management. There were also industrial funds, perpetual bonds, preferred stocks, and interbank assets. If we draw a line in 2020, there will be about 300 billion to 400 billion of assets that can not be disposed of in time. Can the rectification be successfully completed after one year's delay? Some banks told reporters that it could be basically completed, while others said it was more difficult.

Recently, Yin Xingshan, member of the National Committee of the Chinese people's Political Consultative Conference (CPPCC) and President of Hangzhou central sub branch of the Central Bank of China, told the media that it is expected that the vast majority of legal person financial institutions within the jurisdiction can complete the asset management business rectification according to the transitional period arrangement, but there are also some financial institutions with difficulties in rectifying the existing assets, which have applied to the regulatory authorities for case handling and have been approved. "The head office of the people's Bank of China is considering incorporating asset management rectification into the MPA assessment. We will strictly implement the assessment requirements and more effectively standardize the asset management business of financial institutions within our jurisdiction."

The working conference of CBRC in 2021 also pointed out that we should vigorously standardize and rectify key businesses. We will continue to crack down on new forms and varieties of high-risk shadow banking. Strengthen the supervision on the institutions that do not deal with the existing financial assets effectively. We will thoroughly rectify the chaos in the insurance market. We will vigorously rectify financial products that do not conform to the name and reality. In an interview with the media, Guo Shuqing said that it is necessary to evaluate small and medium-sized banks and conduct penetrating supervision and identification of shareholders. Severe punishment should be imposed on those who do not perform their duties well or even take funds illegally from banks. This is a key work this year.

Supplementary capital: 1 / 3 provincial special bonds supplement capital of Urban Rural Commercial Banks

The report on the work of the government in 2021 continues to emphasize the capital supplement of small and medium-sized banks. Specifically, it includes: continue to replenish the capital of small and medium-sized banks through multiple channels, strengthen corporate governance, promote the reform of classified accounts of policy banks, and improve the insurance guarantee and service functions.

Most of the banks are unlisted, and only 10 of the 1545 rural commercial banks are listed. According to the data disclosed by the China Banking and Insurance Regulatory Commission, by the end of the fourth quarter of 2020, the capital adequacy ratios of urban commercial banks and rural commercial banks were 12.99% and 12.37%, respectively, which was higher than that at the end of the third quarter of last year, but still lower than the average level of 14.7% of the banking industry in the same period.

Due to the rapid increase of credit, the establishment of financial subsidiaries, the return of non-standard financial management, and the resolution of non-performing assets, commercial banks are facing the pressure of supplementary capital. A North China brokerage banking analyst said, "bank valuations are too low, which will definitely affect supplementary capital. If Pb is 0.6 times, there is basically no way to supplement tier 1 capital, and even convertible bonds are difficult to issue. " The stock price issue involves banks' supplementary capital, and regulators are also aware of the problem.

From the market point of view, since this year, Ruifeng rural commercial bank has held a meeting and Chongqing bank's A-share listing has raised 3.763 billion yuan. Ningbo bank plans to raise 12 billion yuan in January after the fixed increase of 8 billion yuan last year. In addition, Bank of communications plans to issue no more than 140 billion secondary capital bonds to supplement secondary capital. The postal savings bank plans to issue no more than 150 billion yuan of secondary capital bonds in the next two years, and Industrial Bank plans to issue no more than 100 billion yuan of secondary capital bonds.

For small and medium-sized banks, the special debt supplementary capital is facing the problem of landing difficulty. At present, only 1 / 3 of the provinces have obtained the amount of bonds issued by provinces. In November 2020, the new special bond line of RMB 200 billion will be issued to 18 provinces to support and mitigate the risks of local small and medium-sized banks. In December last year, after the first local special bond to support small and medium-sized banks came into effect, six provinces have issued such special bonds to support local small and medium-sized banks in capital replenishment. As of March 3, Sichuan Province announced that it plans to issue 11.4 billion yuan of special bonds to support the development of small and medium-sized banks. The raised funds will be specially used to supplement 21 Banking financial institutions in Sichuan Province, including 4 urban commercial banks such as great wall West China bank, 7 agricultural commercial banks including Luzhou agricultural commercial bank, and 10 rural credit cooperatives.

For perpetual bonds, the issuing scale of bank perpetual bonds in 2020 was 601.6 billion yuan, an increase of 18.05% year-on-year. Among them, the issuing scale of perpetual bonds of 25 small and medium-sized banks was 86.6 billion yuan, accounting for only 14%. In January this year, the central bank, together with the China Banking and Insurance Regulatory Commission, designed and improved the relevant system of convertible capital bonds to support small and medium-sized banks to supplement capital by issuing convertible capital bonds.

In order to solve the problem of supplementary capital for small and medium-sized banks, especially non listed small and medium-sized banks, a series of innovative tools and supporting policies have been launched. When deploying the key tasks in 2021, the CIRC proposed to support small and medium-sized banks to replenish capital through multiple channels, continue to promote the issuance of local government special bonds to supplement capital, and promote large banks to export risk control tools and technologies to small and medium-sized banks.

Carbon neutral: special policy of financial support for green and low carbon development

It is particularly noteworthy that from the central economic work conference to this year's two sessions, the work of "carbon peak, carbon neutral" will be comprehensively arranged. China's carbon dioxide emissions will reach the peak before 2030 and achieve carbon neutrality before 2060.

According to this year's government work report, the action plan to reach the peak of carbon emissions by 2030 will be formulated. Including: accelerate the construction of national energy use rights, carbon emission trading market, improve the energy consumption double control system. We will implement the special policy of financial support for green and low-carbon development, and set up carbon emission reduction support tools. Zhou Xiaochuan, former governor of the central bank, said at the open forum that "if we want to do a good job in green finance and carbon market, we need to further clarify the total target, and establish a set of parameters, index system, measurement and measurement framework in carbon finance and green finance, so as to effectively plan various tasks and guide investment."

Bai Hexiang suggested that the development and construction of carbon market should be included in the green financial system. We will continue to expand the industry coverage of carbon market and determine the total carbon quota in accordance with the principle of moderately tight. Allow more human and institutional investors to directly participate in carbon emission trading. We will accelerate the improvement of financial market infrastructure such as account opening, registration, trusteeship, clearing and settlement. In combination with the opportunity of Guangzhou futures exchange's registration and establishment, we should timely launch carbon financial derivatives such as carbon futures, carbon swaps and carbon options, and vigorously promote the development of carbon pledge, carbon repurchase, carbon custody and other financing business. Learn from the construction experience of Shanghai Hong Kong stock connect, Shenzhen Hong Kong stock connect, bond link, cross-border financing link and other capital interconnection mechanisms at home and abroad, explore the establishment of "carbon city link".

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