On the first day of 2020, the People’s Bank of China announced a full-scale reduction of 0.5 percentage points next Monday (6th), setting the stage for monetary policy operations this year
A responsible official of the central bank clearly pointed out that the overall RRR cut will release about 800 billion yuan (RMB, the same below) of long-term funds, which will help activate the vitality of market players and support the development of the real economy. Analysis believes that the RRR cut is expected, and its purpose is to supplement the liquidity gap around the Spring Festival and support commercial banks to achieve stable credit expansion. In order to ensure financing needs, it is expected that there will still be room for overall reduction in the second half of the year.
Relevant officials of the central bank emphasized that the reduction of the quota has increased the funding sources of financial institutions, and large and small banks must actively use the reduction of funds to increase support for small and micro enterprises and private enterprises. In this comprehensive reduction, small and medium-sized banks such as city commercial banks operating in provincial administrative regions, rural commercial banks serving rural counties, rural cooperative banks, rural credit cooperatives, and village and town banks will receive long-term funding exceeding 120 billion yuan; in addition, It will also reduce the bank’s capital cost by about 15 billion yuan per year. Through bank transmission, the actual cost of social financing can be reduced, especially for small and micro enterprises and private enterprises.
Fund Manager: Stable Market Expectations
The market is not surprised by the reduction in the level of New Year’s Day and the Spring Festival due to the factors of dual festivals and the large monthly tax payment in January.
Industrial and Commercial Bank and Huafu Securities Chief Economist Lu Political Commissar said that the Spring Festival fell in January this year, and large cash leaks around the Spring Festival or the total liquidity of the banking system will decline; at the same time, this month is also “large tax payment “In addition, new special bonds may be issued one after another this month. The above factors will also cause a large liquidity gap at the beginning of the year.
The central bank pointed out that the RRR cut was hedged with the cash injection before the Spring Festival, and the total liquidity of the banking system will remain “basically stable” and “flexible and moderate”, not a “flooding flood”, which reflects the scientific and stable grasp of monetary policy countervailing Zhou Ji adjusted his efforts, “the sound monetary policy orientation has not changed.”
Li Huiyong, deputy general manager of Huabao Fund, analyzed that the monetary authority chose the “full-scale reduction” method to achieve the purpose of reducing the cost of funds; on the other hand, the period of funds released by the full-scale reduction is longer, which helps the banking system to discuss long-term calculations. And make the effect of the policy signal of “implementing counter-cyclical adjustment policies and stabilizing market expectations” clearer. Chen Ji, a senior researcher at the Bank of Communications and Gold Research Center, believes that in the future, the cargo policy will continue to be stable and operate in a loose direction. The policy adjustment will focus on dredging and improving efficiency.
The market generally believes that there is still room for a full-scale reduction this year, and other monetary policy tools will also appear one after another.
LPR or another 5 basis points
Qin Tai, Shen Wanhongyuan’s head of China economic research, pointed out that in 2020, the central bank only needs to reduce the benchmark by 100 basis points, which is sufficient to support commercial banks to achieve stable credit expansion at a year-on-year growth rate of about 12%. It is expected that the central bank will still have a 50 basis point reduction in the year. The window period may open in July or September this year. Lu’s political commissar estimates that after the full reduction of the quota, the loan market quoted interest rate (LPR) quote on the 20th of this month may be adjusted down by another 5 basis points.
Chen Ji predicts that in order to ensure financing needs, resolve financing difficulties, and expensive financing, in addition to lowering the overall allowance, it is likely that multiple liquidity instruments will be used in combination this month. In the future, the MLF operating interest rate will guide market expectations, and its active adjustment function will gradually increase. During the year, the MLF interest rate may be reduced by 25 to 30 basis points. There is still room for operating in a comprehensive or structural reduction.
Strong price rise, difficult to cut interest rates
However, Tao Jin, a macro analyst at Suning Gold Research Institute, pointed out that due to the pressure of rising prices in China, “even if the CPI continues to rise due to rising pig prices, the central bank will not dare to blindly implement easing policies.” Not much space. Qin Tai also believes that in the face of downward economic pressure, the importance of quantitative tools has become higher. Considering that the current MLF has been bound to LPR, there is not much room for the central bank to cut interest rates this year. It is recommended to pay attention to the quantitative improvement of the credit environment .