An outdoor billboard in Shanghai shows real time data on September 24, 2024 afternoon that the Shanghai Composite Index rebounded by 4.15 percent to 2,863.13 points, with the Shenzhen Component Index soaring 4.36 percent, and the Hong Kong Hang Seng Index soaring 3.96 percent to 18969.38 points. The Hang Seng Index closes higher on the day. Photo: VCG

Chinese officials on Tuesday rolled out a slew of major policy measures to support the country's economy, the housing market and the stock market, including cuts to the policy rate and the reserve requirement ratio (RRR), all aimed at creating a favorable monetary and financial environment for stable economic growth and high-quality development. 

Described by some foreign media as "broader-than-expected," the major policy measures send a strong signal of Chinese policymakers' determination to ensure stable economic growth, which will boost market confidence in the country's economic development in the rest of the year, economists said. 

Crucially, the strong policy support has further raised expectations that the world's second-largest economy will be able to achieve its annual growth target of around 5 percent in 2024, despite downward pressure and external uncertainties, according to the economists. 

Notably, following the announcements of the policies, Chinese stocks closed significantly higher on Tuesday, with the benchmark Shanghai Composite Index up 4.15 percent, marking the biggest single-day gain in over four years, while the Shenzhen Component Index rose 4.36 percent.

The major policy measures were announced at a closely watched press conference on Tuesday morning by the heads of the country's central bank, the financial regulator and the securities regulator. These measures covered a wide range of key areas of the Chinese economy, including overall liquidity, the real estate market and the stock market. 

Pan Gongsheng, governor of the People's Bank of China (PBC), announced that China will cut the RRR - the amount of cash that banks are required to hold as reserves - by 0.5 percentage points in the near future, which would inject about 1 trillion yuan ($142 billion) of long-term liquidity into financial markets. 

Importantly, Pan said that the RRR could be cut by another 0.25-0.5 percentage points within the year depending on the market liquidity situation.  

In addition, the PBC will lower the interest rate of seven-day reverse repos from 1.7 percent to 1.5 percent, while the interest rate for the medium-term lending facility will likely drop by about 0.3 percentage points, and the long-term lending facility and deposit rates will decrease by 0.2 to 0.25 percentage points, Pan said. 

For the housing market, the PBC chief announced that China will lower mortgage rates on existing home loans by an average of 0.5 percentage points, and reduce the national minimum down payment requirement to 15 percent on second homes, among other measures. 

For the securities market, the PBC will create new monetary policy tools to support the stable development of the stock market, Pan said. 

Meanwhile, Wu Qing, chairman of the China Securities Regulatory Commission, announced that China will release in the coming days a guideline on promoting the entry of medium and long-term funds into the stock market.     

"In order to further support stable economic growth, the PBC will firmly adhere to an accommodative monetary policy stance, strengthen the intensity of monetary policy regulation, improve the precision of monetary policy regulation, and create a favorable monetary and financial environment for stable economic growth and high-quality development," Pan said. 

Boosting confidence 

"While there have been some expectations for the RRR cut, the policy intensity is very strong. This sends a signal of proactively stabilizing growth, which is conducive to strengthening confidence in the economic growth," Zhou Maohua, an economist with China Everbright Bank, told the Global Times on Tuesday.

Zhou noted that the policy rate and RRR cuts will release a reasonable level of liquidity, lower the financing costs for the real economy, and stimulate consumption and investment activities. 

"As macroeconomic policy support continues to increase, the positive effects of the policy support will materialize, market confidence will gradually be lifted, demand and prices will improve, and the economy is expected to enter into a virtuous cycle in an accelerated pace," Zhou said. 

Experts said that the announcement of the major policies at the same press conference was also noteworthy, indicating that policymakers have tried to send a clear signal that they are jointly making strong efforts to ensure stable economic growth.

"The simultaneous rollout of multiple major policies, including policy rates and RRR cuts, will further support economic growth, boosting market confidence," Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Tuesday. He noted that the measures will help stabilize the real estate market, boost the stock market and ultimately lift the economic growth rate. 

At the press conference, Chinese officials also announced a number of other policy measures to support various aspects of the Chinese economy, including small and micro enterprises. The National Financial Regulatory Administration (NFRA) will work with the National Development and Reform Commission - the country's economic planner - to establish a working mechanism to support financing coordination for small and micro enterprises, said NFRA head Li Yunze.

Also, to support stable operations of major commercial banks, China plans to inject the tier-1 capital into six major commercial banks in an orderly manner, with coordinated advancement, phased implementation and tailored policies, according to the NRFA chief. 

"The measures announced today are very significant. They will help reduce the costs of capital and provide a strong policy boost for the continuous development of the Chinese economy," Tian Yun, an economist based in Beijing, told the Global Times.

Tian said that the new package of policies, coupled with those already in place, including the issuance of ultra-long special treasury bonds to support large-scale equipment renewal, will lay a solid foundation for strong economic growth in the fourth quarter of the year. And with strong fourth-quarter growth, "the growth target of around 5 percent will be reached," he told the Global Times on Tuesday. 

China has set a GDP growth target of around 5 percent for 2024, and in the first half of the year, the Chinese economy expanded by 5 percent.