Recently, the General Office of the People’s Government of Jiangsu Province issued the “Notice on Printing and Distributing Several Measures for Jiangsu Province to Implement Special Actions to Boost Consumption” (hereinafter referred to as the “Several Measures”). It clearly states that commercial banks should be guided to expand the supply of counter bond investment products such as local government bonds, financial bonds and corporate credit bonds under the premise of compliance.
This measure closely follows the relevant policy orientation of the People’s Bank of China. On February 29th of this year, the People’s Bank of China issued the “Notice on Matters Concerning Counter Business in the Inter-Bank Bond Market”, which came into effect on May 1st. The notice aims to further expand the varieties of counter bond investment, optimize the relevant mechanism arrangements, facilitate bond investment by residents and other institutional investors, increase residents’ property income, and accelerate the development of a multi-level bond market. The notice clearly states that all types of bonds that have been traded and circulated in the inter-bank bond market can be invested and traded through the counter, provided that the investor suitability requirements are met.
This time, Jiangsu Province’s guidance for commercial banks to expand the supply of counter bond investment products is expected to bring about multiple positive impacts. For investors, this will enrich investment options. At present, the scale of government bonds directly held by Chinese residents is relatively small. Compared with mature bond markets, there is huge room for improvement. By investing in the bond market through the counter channel, residents can efficiently convert their savings into bond investments and increase their property income. The trading varieties provided by the counter business operators of the inter-bank bond market to individuals and enterprises mainly include government bonds, local government bonds and policy financial bonds. These bonds have a relatively high margin of safety. Generally, the coupon rate of these bonds is higher than that of bank deposits of the same term, balancing safety and profitability. Moreover, investors can sell bonds or pledge them during trading hours, which ensures good liquidity.
From the perspective of financial market construction, it is conducive to promoting the development of direct financing and optimizing the structure of the financial system. At present, the over-the-counter bond market is characterized by a large number of issuers, few varieties and small scale. At the end of 2023, the bond custody amount in the counter market was 783.801 billion yuan, accounting for only 0.56% of the total bond custody balance (140.43 trillion yuan), which was significantly smaller in scale. Expanding the supply of counter bond investment products can enrich the levels of bond investors, enhance market resilience and promote market stratification. Counter bond business, as an extension of the inter-bank bond market to retail finance and inclusive finance, enables commercial banks to provide various flexible and diverse comprehensive services such as bond custody, market-making, collateral management, and integrated clearing and settlement for all types of investors, enhancing market activity.
At the specific implementation level, some banks have been actively preparing for related businesses before. If Industrial and Commercial Bank of China has successfully participated in the issuance and distribution of the first policy bank counter bond “China Export-Import Bank 2024 First Phase Green Finance Bond” after the release of the People’s Bank of China’s “Notice”, and at the same time has made preparations including promoting the update and revision of the bank’s internal systems and measures, expanding the scale of counter bond quotations for existing bonds and improving the quality of bond trading quotations Meet investors’ asset allocation and investment transaction needs from multiple perspectives. In the future, commercial banks within Jiangsu Province may draw on such experiences and, on the premise of compliance, further expand counter bond business services to meet the diversified and differentiated investment needs of investors. Strengthen the supply of products and services and improve the accessibility of services; Work together to intensify market cultivation efforts and enhance service quality and efficiency.
In addition to expanding the supply of counter bond investment products, the Notice also covers many measures to boost consumption, including the construction and expansion of 80 compulsory education schools in the education sector by 2025, and encouraging localities with conditions to pilot spring and autumn breaks for primary and secondary schools. In terms of housing, efforts should be made to increase support for the withdrawal of housing provident funds for renting houses and for the construction, renovation and major repair of self-occupied houses. In the fields of culture, sports and tourism, the “Travel with Events” campaign has been launched, and projects integrating sports and tourism have been cultivated, etc., to comprehensively promote the prosperity and development of the consumer market in Jiangsu Province.
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