CBN丨PBOC resumes use of PSL facility to inject 350b yuan into policy banks

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21世纪经济报道 2024-01-04 20:07:00

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Hi everyone. I’m Stephanie LI.

Coming up on today’s program

China’s net PSL reaches 350 billion yuan in first month after PBOC reintroduced the tool;
BYD overtakes Tesla in quarterly EV sales for the first time.

Here’s what you need to know about China in the past 24 hours

The net pledge supplemental lending value of China’s three policy banks reached 350 billion yuan in December, the first month after the People’s Bank of China reintroduced PSLs.

The net PSL value of China Development Bank, Export-Import Bank of China, and Agricultural Development Bank of China totaled 350 billion yuan last month, the third-highest monthly value ever recorded, according to data released by the PBOC on Tuesday.

The PBOC did not disclose the specific sectors to which the newly added PSL will be allocated, but market analysts said the proceeds from the PSL will likely be used to invest in government-subsidized houses, reconstruct villages in urban areas, and build disaster-resilient public infrastructures.

According to previous cases, the release of one PSL fund can generate around 2.5 times the project investment, experts said. If the PBOC issues 500 billion PSLs this round, they are expected to contribute 0.5 to 0.7 percentage point to the country’s total fixed asset investment growth and boost market sentiment.

Established in 2014, the PSL is one of the central bank's monetary policy tools. Its primary role is to provide financial institutions with longer-term and low-cost financing, specifically aimed at supporting the national economy's key sectors and weak areas and fostering the development of social initiatives.

The last time the PBOC used the PSL program was in February 2023, with an infusion of 1.7 billion yuan, according to media reports. With a monthly addition of 350 billion yuan, this marks the third-highest monthly injection in the history of the PSL program.

Given that PSL funds have historically been mainly invested in real estate-related sectors, there is significant market attention as to what fields the loans will be directed, the report said.

The "Three Major Projects" under the new development model for the real estate sector - the construction of affordable housing, the development of "dual use" public infrastructure and urban renewal projects -- will need a substantial amount of medium- to long-term low-cost funding.

At this pivotal stage of China's economic recovery, the PBOC is properly intensifying the use of the PSL facility, which is expected to alleviate financial pressure in specific sectors, stimulate effective investment, and promote employment and overall consumption, experts noted.

China-Laos Railway has cumulatively transported 4.22 million tons of freight in 2023, an increase of 94.9 percent year-on-year, reflecting strong momentum since it entered commercial operation two years ago, according to data from Kumming customs.
China Railway Express’ China-Europe freight trains are booked up for January and prices are now between 10 percent and 20 percent higher than in December, media reported yesterday, as international traders seek alternative modes of transport after many global shipping giants suspended transport through the Red Sea following a number of attacks on their ships.

Greater Bay Area, Greater future

The economic vitality of waterborne transport along the Pearl River revealed an overall recovery and growth trend last year, said a senior official on Wednesday in Guangzhou. Freight volume on the Pearl River is projected to have hit a record of over 1.5 billion metric tons in 2023, up 7.9 percent year-on-year. Port throughput along the Pearl River and its estuaries and tributaries is expected to have reached 1.95 billion tons, a year-on-year growth of 7.3 percent. Among the total, throughput of foreign trade commodities hit 529 million tons while throughput of containers stood at 69.82 million TEUs (twenty-foot equivalent units), year-on-year increases of 6.9 percent and 2.3 percent, respectively.
The Airport Authority Hong Kong is offering its first-ever local currency public bond, pricing a HKD4 billion debt deal as passenger traffic recovers at the financial hub. The bond with a three-and-a-half-year tenor has a coupon rate of 3.83 percent and was 1.75 times oversubscribed after receiving orders over HKD11.1 billion, the authority said in a statement yesterday.

Next on industry and company news

The Civil Aviation Administration of China (CAAC) on Thursday forecast the number of China's international passenger flights to reach 6,000 per week at the end of 2024, recovering to 80 percent of pre-pandemic levels. China's international flight volume in 2023 recovered to more than 4,600 flights per week comparing with less than 500 per week in the beginning of last year, up by 9.6 times, CAAC data showed, while that the scale of domestic route passenger traffic has exceeded by 1.5 percent from the 2019 levels. Regarding Chinese made aircraft, the CAAC said it will promote the approval review of homegrown C919 aircraft for European Aviation Safety Agency, which aims to allow the aircraft operate in more countries.
Chinese electric vehicle (EV) giant BYD overtook US-based Tesla to become the world's biggest EV maker in the fourth quarter of 2023 for the first time, according to latest data from the companies. Tesla said Wednesday that it delivered 484,500 EVs in the final quarter of 2023, which also marked a new record for the company. BYD, in comparison, sold about 526,400 EVs during the same period.
Huawei Technologies said yesterday that it has halted certain partnerships with Autohome, Dongchedi, and Yiche, China's specialized websites for automotive information, until new agreements are reached via negotiations, as agreements between Harmony Intelligent Mobility Alliance and multiple auto information providers expired. Detailed information about Huawei’s Aito and Luxeed vehicle models cannot be seen on the platforms, media reported yesterday.
Chinese EV startup Nio has joined hands with Chinese solar giant Longi Green Energy Technology to promote the use of green energy from photovoltaic power generation in battery charging and swapping stations. Nio and Longi will work together to advance the distributed PV system coordinated with Vehicle to Grid, the set of technologies that enables electric vehicles to deliver power to the grid, Nio announced yesterday. The two will also build PV power, energy storage, battery charging, and swapping all-in-one stations.
CIFI Holdings Group has released a preliminary proposal for a restructuring plan that would about halve the struggling Chinese real estate developer’s USD7 billion overseas debt. Creditors can convert their debts into new bonds with terms of two to nine years and nominal interest rates of 2 percent to 4 percent to expand debt maturities and cut debt principals, the developer said in a filing yesterday.
WM Motor, a struggling Chinese EV startup, has made progress in getting its restructuring started to bring in investors to continue operations. The pre-restructuring application, filed in October, was approved by a court in Shanghai, the firm announced on Wednesday. WM has approached several potential investors while achieving preliminary results, it noted.
Chinese EV startup Xpeng expects to achieve mass production of its roadable aircraft, which is suitable for short-distance travel in cities, by the fourth quarter of 2025, and they will retail for over 1 million yuan each. Xpeng unit Guangdong Xiaopeng is teaming up with Guangdong Huitian to develop, manufacture, sell and service flying cars, the company said late Tuesday.
China National Offshore Oil Corp has further expanded its presence in Brazil's deep water pre-salt oilfields following the start of production of its Mero2 project on Tuesday. Mero2 is one of the four production units of Mero, the country's third-largest pre-salt oilfield located at a water depth of between 1,800 and 2,100 meters. The production capacity of the project is 180,000 barrels of crude oil per day, the company said.
Shanghai Legoland Resort is expected to open around spring or summer of next year, media reported yesterday. Once up and running, the theme park should attract three to five million tourists a year to the city’s southwestern Jinshan district, the report said.

Switching gears to financial news

AllianceBernstein Holding has become the fifth foreign-owned asset management company to start operating mutual funds in China, after BlackRock, Neuberger Berman Group, Fidelity International, and Schroders. The China Securities Regulatory Commission approved AllianceBernstein Fund Management to conduct business that pools money from different investors to allocate it to a portfolio of assets, the firm announced on Tuesday.

Wrapping up with a quick look at the stock market

Chinese stocks fell on Thursday, as the benchmark Shanghai Composite shed 0.4 percent and the Shenzhen Component lost 1.2 percent. Hong Kong’s Hang Seng index ended flat while the TECH index inched up 0.2 percent.

Biz Word of the Day

PSLs (Pledged Supplementary Lending) are large long-term pledge loans that use high-grade bond assets and high-quality credit assets as collateral for cheap credit from the People’s Bank of China. The facility was used once last year to channel a trillion yuan at sub-market rates to the China Development Bank, providing funds for social housing projects.