The "Proposal of the Central Committee of the Communist Party of China on the Formulation of the 15th Five-Year Plan" proposes to improve the central bank system, establish a more scientific and stable monetary policy system, and improve comprehensive macroprudential management, so that monetary policy can be transmitted more smoothly to the real economy.
Recently, Pan Gongsheng, governor of the People's Bank of China, revealed at the 2025 Financial Street Forum that the central bank is studying a new mechanism - under special circumstances, it can directly provide liquidity support to non-bank financial institutions (such as securities firms, funds, insurance, etc.).
In the past, central banks mainly invested money "indirectly" through commercial banks, but this method sometimes did not quickly benefit the entire financial market. Industry insiders believe that this exploration is precisely to open up the "last mile" of monetary policy transmission.
This change has two major significances:
Enhance market stability: In extreme market conditions (such as severe fluctuations in the stock market and depletion of liquidity in the bond market), the central bank can "rescue" faster and more directly, playing the role of a "stabilizer"; Promote monetary policy transformation: From the past mainly regulating aggregate and relying on the banking system, to a "full coverage" model that pays more attention to structural optimization and covers the entire financial market.
To put it simply, the central bank's "faucet" is no longer only aimed at banks, but may also flow directly to more types of financial institutions in the future, making the policy effect more accurate and timely.
The liquidity management framework has ushered in a new upgrade
Recently, the central bank proposed to explore the direct provision of liquidity support to non-bank financial institutions (such as securities firms, funds, insurance companies, etc.) under special circumstances. The market generally believes that this is an important "structural upgrade" of the monetary policy tool system.
Industry insiders pointed out that this is not only an advance layout of the current market liquidity, but also shows that the central bank's regulatory means are becoming more and more refined and flexible.
At present, the central bank's monetary policy "toolbox" has many means of investing liquidity, such as:
Short-term reverse repurchase and buyout reverse repurchase Medium-term lending facility (MLF), standing lending facility (SLF) Collateral Supplemental Loan (PSL) Adjustment of the reserve requirement ratio Re-lending and re-discounting Structural policy tools (e.g. targeted support for small and micro enterprises) Even began to buy and sell treasury bonds directly
But in the past, these tools were mainly for commercial banks, and non-bank institutions could only obtain funds indirectly through banks, which was sometimes not efficient enough.
Now, the central bank has begun to "go direct" to non-bank institutions. In recent years, the central bank has taken a key step in establishing channels to directly serve non-bank institutions, mainly in two categories:
Swap facilitation tools: securities, funds, insurance companies can use their bonds, ETFs and other assets to exchange for highly liquid assets such as treasury bonds or central bank bills from the central bank; This tool shares an 800 billion yuan quota with "stock holdings, repurchase and re-lending", which can quickly improve the cash flow flexibility of non-bank institutions.
Open market treasury bond trading: From September to December 2024, the central bank released equal liquidity to the market through net purchases of about 1 trillion yuan of treasury bonds; The transaction partners not only include banks, but also cover some non-bank institutions.
Next: Preparing for Extreme Situations?
For the "exploration of new mechanisms" mentioned this time, the market pays special attention to its innovations. The new tools may not be routine tools for everyday use, but are specifically designed to stabilize the "contingency" liquidity support of capital markets during extreme market volatility. In other words, the central bank is building a more comprehensive and flexible liquidity safety net - usually regulated by conventional tools, and can quickly "accurately transfuse" non-bank institutions at critical moments to prevent market failure.
|有助于维持金融市场稳定
The central bank's exploration of providing direct liquidity support to non-bank institutions (such as securities firms, funds, insurance asset management, trusts, etc.) is actually a "rainy day" system upgrade - the purpose is to prevent financial risks in advance and maintain the bottom line of market stability.
In recent years, these non-bank institutions have developed rapidly, with assets under management reaching tens of trillion yuan, and are deeply involved in various market transactions such as stocks, bonds, and derivatives. However, their business often involves "borrowing short to invest long", credit conversion and liquidity mismatch, and they are prone to sudden financial shortages.
At present, the central bank's liquidity support is mainly for banks. Once non-bank institutions are short of money, they can only rely on bank loans or are forced to sell assets at low prices. However, when the market is turbulent, banks themselves may also "tighten their money bags" and are reluctant to lend - which leads to monetary policy transmission stuck shells, and risks may be amplified.
Early reserve liquidity tools for non-bank institutions have three major benefits:
Emergency "support": quickly inject funds in extreme situations to prevent local problems from turning into systemic crises; Dredging and transmission: so that monetary policy can reach the capital market more accurately and faster; Stabilize expectations and reduce costs: When the funds of non-bank institutions are stable, the bond market and stock market transactions will be more active, and it will be easier and cheaper for enterprises to issue bonds and raise funds.
For a long time, China's monetary policy has been mainly transmitted through the banking system. However, in times of violent volatility, if banks suddenly tighten credit, non-bank institutions may "run out of food", triggering a chain reaction.
Therefore, the establishment of a liquidity mechanism directly to non-banks is not only a safety valve at a critical moment, but also a strengthening of the central bank's role as the "lender of last resort" - so that policy tools can be covered, respond faster and more accurately.
In order to make the "direct non-bank" truly implemented, it is also necessary to improve the supporting system
Although it is an important direction for the central bank to explore the direct provision of liquidity to non-bank institutions (such as securities firms, funds, insurance, etc.), it still needs a set of legal, operational and regulatory rules to support it to operate safely and effectively.
Experts pointed out that in the future, the central bank may learn from international experience and launch tools similar to the Federal Reserve, such as primary dealer credit facilities and standing repurchase facilities.
These instruments allow non-bank institutions to obtain funds directly from the central bank with qualified assets such as treasury bonds, corporate bonds, commercial paper, and ABS as collateral. However, different institutions should have different thresholds. Zeng Gang of the Shanghai Finance and Development Laboratory suggested:
For systemically important non-bank institutions (such as large brokerages or head funds), long-term instruments similar to "standing lending facilities" can be set up, but higher quality collateral is required and punitive interest rates (to prevent abuse); For ordinary non-bank institutions, temporary support measures can be launched to help them tide over short-term difficulties when the market fluctuates violently and liquidity is tight.
System construction needs to start from three aspects, Zeng Gang emphasized that in order to make this mechanism both flexible and controllable, it is necessary to lay a good foundation at the institutional level:
Clarify legal authorization
It is clearly written in the law: under what circumstances, to which institutions, and under what conditions the central bank will provide liquidity support to avoid "patting the head" decisions.
Refine the operating rules
Including: Who is eligible to apply? What assets can be used as collateral? How to set the interest rate? How to control the quota? There must be clear standards for these.
Strengthen regulatory coordination
Liquidity support cannot be operated in isolation, but must be linked with existing non-bank institutional supervision, bankruptcy disposal, investor protection and other systems to prevent moral hazard - for example, institutions dare to take blind risks if they feel that "the central bank will cover the bottom anyway". Finally, Zeng Gang reminded: "This mechanism cannot be done once and for all, and the effect should be regularly evaluated and continuously optimized according to market changes." ”
How to seize this institutional dividend?
1. Short-term: Pay attention to the valuation repair of the non-bank financial sector
Brokerage stocks (such as CITIC Securities, Huatai Securities): directly benefit from liquidity support expectations;
Internet wealth platforms (such as Oriental Wealth): the stability of its fund sales and asset management business has been enhanced;
Insurance stocks (such as Ping An of China): Insurance asset management is included in the scope of policy support to improve asset allocation flexibility.
2. Medium-term: Layout of "policy-sensitive" assets
High-grade credit bonds and interest rate bonds: volatility is expected to decline and allocation value increases;
Science and technology growth stocks: the liquidity environment has improved, and the valuation anchor has become more stable;
ETF products: As qualified collateral, demand may rise.
