China: WeiyangX Fintech Review

The People’s Bank of China Has Launched Innovative Monetary Policy Instruments to Enable Direct Support for the Real Economy

In line with the arrangements of the Report on the Work of the Government, the People’s Bank of China (PBC) has launched another two instruments that can directly support the real economy:

1) Support instrument for deferring the repayment of inclusive MSB loans

Due to the impact of COVID-19, most MSMEs have been suffering from capital turnover difficulties. To ease their pressure of repaying the principal and interest of loans, the PBC and the CBIRC introduced policies on deferring the repayment of principal and interest of loans to MSMEs, with the repayment deadline extended up to June 30, 2020. The Report on the Work of the Government proposed a further extension of the repayment deadline to March 31, 2021. It is estimated that the policy of deferred repayment will cover inclusive MSB loan principal of around RMB 7 trillion.

In order to encourage locally incorporated banks to ensure maximum coverage of the deferment of inclusive MSB loan repayment, the PBC launches a support instrument for deferring the repayment of inclusive MSB loans and provides RMB 40 billion of central bank lending. The PBC, through interest rate swap agreements signed between special purpose vehicles (SPVs) and locally incorporated banks, provides the banks with incentives equaling to one percent of the principal of inclusive MSB loans under deferred repayment. The instrument is estimated to support locally incorporated banks to defer the repayment of loan principal of around RMB3.7 trillion, thus substantially addressing the MSBs’ pressure of repaying the principal and interest of loans.

2) Support plan for inclusive MSB credit loans

In light of MSBs’ high operational risks, banks normally require for collateral guarantees before issuing loans. Currently, only around 8% of loans issued by small and medium-sized banks are credit-based. The PBC is launching a support plan for inclusive MSB credit loans, in which RMB 400 billion of central bank lending is to be provided. The PBC will provide favorable funding support for locally incorporated banks through agreements of the support plan for credit loans signed between SPVs and the banks.

The plan is mainly targeted at locally incorporated banks with sound performance, and those rated between levels 1 and 5 in the PBC’s rating of financial institutions in the last quarter are qualified applicants for preferential credit loans. For new inclusive MSB credit loans that are issued by eligible locally incorporated banks from March 1, 2020, to December 31, 2020, and have a maturity of no shorter than 6 months, the PBC will provide the banks with favorable funding through the support plan. The funding equals up to 40 percent of the principal actually issued, with a maturity of one year. The MSBs covered by the plan shall promise to keep employment basically stable. The credit support is expected to encourage locally incorporated banks to issue around RMB 1 trillion of inclusive credit loans to MSBs, thus substantively addressing the difficulties of MSBs in raising funds. (Source: PBC)

China’s Bank and Insurance Industry Made Over 200-billion-yuan IT Investment in 2019

In 2019, the Banking and Insurance Regulatory Commission launched a special cybersecurity law enforcement campaign in the financial industry. According to the result of the self-examination of banks and insurance institutions, measures have been taken in various aspects such as management and technology to improve cybersecurity management capabilities. Among them, the increase in investment in information technology resources has been significant.

In 2019, the total investment in information technology of major banking institutions exceeded 173 billion yuan, an increase of 22.8% year-on-year; the major insurance institutions invested more than 33 billion yuan in information technology, an increase of 16.9% year-on-year. (Source: China Securities Journal)

China Beijing Environment Exchange and WeBank Co-launch a Blockchain-based Reward Platform to Encourage Green Mobility

June 5th was the United Nations’ World Environment Day. China Beijing Environment Exchange, WeBank, and green travel promotion entity Green Inclusive co-launched a green mobility platform called “Green Mobility Inclusive Platform”. The platform is based on the FISCO BCOS blockchain underlying platform of which WeBank leads the development. Users could set up a Green Mobility account, and get rewarding credits (in cash, insurance policy, or public benefits) by reducing his/her carbon footprint, such as using public transport systems and green driving behavior recorded by IoT devices. (Source: Green Inclusive)

 


 

The above is a weekly synopsis of the biggest stories on Fintech in China provided by WeiyangX, part of Tsinghua University, in partnership with Crowdfund Insider.

WeiyangX is the most influential website focusing on Fintech in China. The site covers the latest news, industry data analysis, business practices, and in-depth Fintech cases in Fintech. WeiyangX is incubated by Fintech Lab. Founded by Tsinghua University’s People’s Bank of China (PBC) School of Finance in 2012, the Fintech Lab is the first and leading research entity dedicated to leading best practices, promoting interdisciplinary innovation, and encouraging entrepreneurship in the field of fintech through scientific research and innovative project incubation.

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