Monetary policy “matching” is more clearly expressed and emphasizes grasping the relationship between the two largest funding markets.
On February 8, the People’s Bank of China released the “Report on the Implementation of China’s Monetary Policy for the Fourth Quarter of 2023” (hereinafter referred to as the “Report”) Based on a systematic review of policies and results over the past year and analysis comprehensive of the current economic and financial situation, it explains Policy orientation and focus in the next step. Industry insiders said the report released a positive signal and the People’s Bank of China is still expected to maintain strong policy support for future economic recovery.
Speaking about the main ideas of monetary policy in the next step, the report stated that prudent monetary policy must be flexible, moderate, precise and effective. Reasonably understand the relationship between the two largest funding markets, bonds and credit, correctly understand the new laws and features of money and credit supply and demand, guide reasonable growth and release balanced credit, maintain reasonable and sufficient liquidity, and maintain the funding scale social and money supply in line with economic growth and level prices to match expected goals. Strengthen policy coordination and cooperation to support effective consumption promotion, stabilize investment, expand domestic demand, and keep prices at reasonable levels. We will continue to deepen the process of market-based interest rate reform, further improve the loan market quote rate formation mechanism, give full play to the role of the market-based adjustment mechanism for deposit interest rates, and promote stability and the comprehensive decline of social funding costs. Give full play to the dual functions of total volume and structure of monetary policy instruments. Support the adoption of debt restructuring and other methods to revive the credit stock and improve the efficiency of the use of existing loans.
Analysts in the industry believe that the report emphasizes “maintaining the scale of social financing and money supply to match the expected goals of economic growth and price levels”, compared to the previous “maintaining the rate of growth of money supply and scale social financing essentially in line with the nominal economic growth rate”, this statement clearly reflects economic growth and price levels, and also takes into account expected factors, which are conducive to coordinating goals economic and prices. The corresponding anchor is clearer and can better guide and stabilize expectations. .
This person believes that the meaning of “matching” can be reasonably understood from three perspectives. One is that “equal” does not mean “exactly equal”. The scale of social financing and the growth rate of M2 depends on the macro situation and regulatory needs. When the economic momentum weakens, it is appropriately higher than the nominal economic growth rate. When the economy overheats, the gap narrows or even becomes lower. This is the need for a counter-cyclical adjustment. Secondly, “matching” needs to be looked at over a long period of time and across cycles. Matching is a medium to long term concept and does not need to be matched every quarter or even every month. During the last two years, financial data has continued to lead economic data. In the future, as the macroeconomic recovery improves, the gap between economic and financial growth is expected to gradually close. The third is to judge the intensity of the financial support more based on the cumulative increase in loans. The progress in individual months is easily disturbed by multiple factors such as foundation, seasonal patterns, assessment and supervision, etc. The cumulative increment can reflect the strength of the support over a period of time more objectively and comprehensively.
It is worth noting that the report also released an indication that the focus of the main aggregate financial indicators has changed. Some within the industry said that the report emphasized the need to maintain reasonable growth in funding and financial aggregates, and to reasonably understand the relationship between the two largest funding markets, namely bonds and credit. the real economy must be looked at from a wider perspective. Funding support is not limited to credit. Compared to indirect funding, direct funding channels such as bonds are actually more efficient Both also reflect the support of the financial system to the real sector Need to look on financial aid together. Moreover, under the guidance of improving the consistency of macro policy orientation, the effects of fiscal, industrial and other macro policies will be reflected in government bonds, corporate bonds, equity and other finance, and the development of direct financing is also more suitable. for technological innovation, new drivers, etc., producing something healthy instead of the demand for money and credit, and the combined inspection is also favorable to avoid misunderstandings of financial and financial conditions. (Reporter Zhang Mo)
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