MNI China Press Digest July 17: Mortgages, Investment, Equity

Highlights from Chinese press reports on Monday:

• The banking sector is stepping up research on allowing a lower interest rate of outstanding housing mortgages following the central bank official’s comment last Friday. Zou Lan, head of the monetary policy department at the People’s Bank of China, said they will support and encourage commercial banks to independently negotiate with borrowers to change the contract, or to replace existing loans with new loans. The PBOC has not mentioned such an adjustment since the global financial crisis in 2008. Allowing discounts on outstanding loans will put pressure on the stability of banks, especially on large state-owned banks with a higher proportion of housing mortgages, so this round of reductions may start from small- and medium-sized banks, said Huaxin Securities Analyst Yang Qinqin. (Source: Yicai)
• China should continue to encourage and support private investment in the construction of major national infrastructure and key projects by using national funds, said Li Yizhong, former minister of industry and information technology. The annual growth rate of private investment fell from 25% to 0.9% between 2012 to 2022, which Li thinks may have dropped too much. Cutting overcapacity does not mean reducing investment, but is necessary to improve the efficiency and effectiveness of investment which can create demand and stimulate consumption, he added. This requires further strengthening technological innovation via the establishment of research and development bases and the acceleration of key technology breakthroughs, Li said. (Source: 21st Century Business Herald)
• China will gradually allow long-term funds such as insurance, social-security and pension funds to invest in private-equity funds, said Fang Xinghai, vice chairman at the China Securities Regulatory Commission. CSRC will also broaden exit channels and promote a virtuous cycle of "investment-exit-reinvestment". Meanwhile, authorities will also develop a tax-neutral system and incentive mechanism, improve data governance, and promote infrastructure construction such as information disclosure, electronic contracts, and share registration. (Source: China Securities Journal)