Boosting Domestic Demand: Fiscal and Financial Policies Combine to Activate Consumption Potential
China Securities Journal reporter Qin Yanling, He Jiaoyuan
The policy of interest rate subsidies for corporate loans and personal consumption loans has been officially implemented, marking the first time that the central government has introduced a subsidy policy in this field. This "dual-interest" policy aims to strengthen fiscal and financial tools to mobilize more credit funds into the consumer sector, reducing the borrowing costs for both individuals and businesses, while ensuring and improving people's lives. The subsequent macro policies are expected to further coordinate efforts to boost consumption and expand domestic demand.
"Unlike previous subsidy policies that mainly supported investment and supply sides, this time the central government will work with relevant departments to simultaneously support both supply and demand sides of consumption, aiming to benefit every household." Vice Minister of Finance Liao Bing emphasized that the policy of interest rate subsidies for personal consumption loans breaks with the traditional practice of providing blanket interest rate subsidies, precisely supporting the portion used for consumption, truly benefiting borrowers with a willingness to consume; corporate loan subsidies are precise in improving the operational status of relevant entities.
The policy is more targeted, and the "dual-interest" policy also differs from direct fiscal subsidies. The two interest rate subsidy policies will work together with financial policies to play a guiding role, mobilizing more financial liquidity into truly consumer-oriented fields, stimulating consumption potential, and enhancing market vitality.
In June this year, the People's Bank of China issued the "Guiding Opinions on Financial Support for Consumption and Aging Loans", setting up 5 trillion yuan in service consumption and aging loans, encouraging financial institutions to increase lending to consumer-oriented fields.
"This time, the two interest rate subsidy policies are consistent with the previous policy of supporting consumer-oriented fields, which will produce a '1+1>2' policy effect." said an official from the People's Bank of China, one hand, the interest rate subsidy policy directly reduces the borrowing costs for residents and businesses by subsidizing loan interest payments, alleviating financial burdens; on the other hand, the re-loan policy links policy incentives with commercial banks' lending to consumer-oriented fields, promoting banks to increase lending to consumer-oriented fields and benefiting businesses.
Liao Bing emphasized that these two interest rate subsidy policies are another innovative exploration in supporting consumption through fiscal and financial coordination. These policies can also be combined with existing policies such as the policy of replacing old products with new ones, allowing the masses to enjoy more real benefits during the consumption process.
The effectiveness of the policy will depend on whether the financial subsidies are precisely and efficiently allocated. Therefore, good financial management is a key factor in ensuring the policy's smooth implementation.
A spokesperson from the Financial Supervisory Bureau emphasized that the bureau will urge lending institutions to establish sound internal review and handling mechanisms, promptly rectify any problems found, strengthen consumer rights protection, and guide local financial regulatory agencies to include the execution of personal consumption loan interest rate subsidies in their daily supervision.
During the implementation of the policy for corporate loans with interest rate subsidies, guiding commercial banks to strictly apply the results of industry management department reviews and inspections to request subsidies, dynamically track loan flows, strengthen fund usage control, and ensure that funds are used in accordance with regulations.
A spokesperson from the Financial Supervisory Bureau emphasized that commercial banks should focus on eight consumer-oriented industries closely related to people's daily lives, including dining, accommodation, health, elderly care, childcare, household services, entertainment, and tourism, increasing credit lending efforts. "In particular, for small micro-enterprises that meet conditions, we emphasize the importance of leveraging the mechanism established by the Financial Supervisory Bureau in October last year to support small micro-enterprise financing, guiding banks to precisely interface, achieving credit funding 'direct to the grassroots, fast, convenient, and interest rate reasonable'."
In addition, the sustainable development of financial institutions is also a key focus. An official from the People's Bank of China emphasized that consumer loan interest rates are determined by banks taking into account their own funding costs, management costs, risk premiums, and market principles, with the subsidized portion directly provided to the masses, supporting consumption and expanding domestic demand while also considering the sustainable development of real economy.
He emphasized that in the next step, the People's Bank will guide financial institutions to increase lending to consumer-oriented fields, optimize resident consumption finance products and services, simplify approval procedures, enhance consumer finance product attractiveness, support genuine consumer demand; improve credit loan interest rate pricing capabilities, product innovation and differentiation pricing based on customer needs and risk features, ensuring long-term sustainability of consumer financial services.