January 25, 2024
After the executive meeting of the State Council on Monday indicated that more powerful and effective measures would be taken to stabilize the market and confidence, the market is already looking forward to lowering the required reserve ratio to stimulate the economy . Pan Gongsheng, Governor of the People’s Bank of China, delivered good news at the State Council Information Office press conference yesterday, announcing that he would lower the reserve deposit ratio by 0.5 percentage points on February 5 to provide long-term liquidity to the market. about 1 trillion yuan (RMB. The one below). Pan Gongsheng also proposed that from today (25th), the re-lending and re-discounting interest rates of financial institutions to support agriculture and small businesses will be reduced from 2% to 1.75%, saying that these measures will help to push down the prime loan rate (LPR).
Pan Gongsheng personally announced that it will take effect on February 5
The governor of the People’s Bank of China rarely announced a cut in the reserve requirement ratio during a question-and-answer session with reporters from the State Council Information Office. Pan Gongsheng also explained the policy philosophy, mentioning that the market generally expects Fund US federal. monetary policy to shift.” Objectively, it is also favorable for us (People’s Bank of China) to expand the operating space of monetary policy.”, and will continue to promote a steady decline in comprehensive social financing costs in the future.
In the past two years, the People’s Bank of China has cut the reserve requirement ratio by 0.25 percentage points each time. This time it has been reduced by 0.5 percentage points in one fell swoop. This is the first time since December 2021, when it has also reduced the refinancing interest rate by 0.25 percentage points. Analysts believe that the People’s Bank of China’s RRR cut is more than expected. On the one hand, it can solve the problem of funding shortages caused by the long Spring Festival holiday and the bank’s loan peak at the beginning of the year. more importantly, it can release a signal of stable growth to the outside world and help improve market confidence.
Pan Gongsheng also elaborated on the monetary policy thinking of the People’s Bank of China, when the global epidemic started three years ago, foreign central banks cut interest rates to save the economy, which led to high inflation. Then there were many central banks has to raise interest rates aggressively to counter it. During this period, “we did not win big (monetary policy)”, and there is no big expansion, “so there is no problem of deflation or inflation.
US interest rate cuts add room for China’s monetary policy
Currently, the inflation in the United States has decreased, and the inflation in China is also low, even falling into negative numbers. Pan Gongsheng gave an analogy: “To put it more vividly, the level of inflation in advanced economies has fallen from the 10th floor to the 3rd floor, and in China it has fallen from the 2nd floor to the 1st floor. “”, which means there is still room to introduce a loose monetary policy.
The United States has a high chance of ending its interest rate hike cycle, or even turning around and cutting interest rates. Pan Gongsheng bluntly said that the “monetary policy cycle gap” between China and the United States is converging, which is objectively favorable to enhance China’s autonomy in monetary policy operations and expand the space for monetary policy operations.
As monetary policy is further relaxed, Xu Changneng, deputy governor of the People’s Bank of China, said, given that banks have a “good start” at the beginning of each year, and the effectiveness of various policies in the second half of last year. gradually it became clear, it is expected that the first quarter of this year will still maintain a relatively fast pace., credit growth. He explained that various organizations are chasing a “good start” Large-scale projects generally start construction at the beginning of the year. As well as preparations for spring plowing at the beginning of the year, there will be salary payments before the Spring Festival. brings a comparative. intensive funding needs.
Xuanchangneng added that the People’s Bank of China will guide financial institutions to understand the rhythm and support the real economy consistently. He believes that the pace of credit supply throughout the year will be more balanced.
Regarding the demand for credit this year, Pan Gongsheng noted that in the fourth quarter of 2023, the Ministry of Finance will issue an additional 1 trillion yuan of treasury bonds, most of which will be used in 2024, forming a load work of investment and physical work. , which is sure to become one of the forces driving the demand for credit.
As there is a need to reduce social financing costs and balance the pressure on the net interest margins of domestic banks, Xuanchang Neng mentioned that the People’s Bank of China will comprehensively consider the relationship between deposit interest rates, financial yield, dividend. rates, etc., and promote the marketization of deposit interest rates Support banks to reduce liability costs and create conditions for lowering interest rates on loans.
MLF and LPR interest rates are expected to be reduced in the first quarter
In addition, it will also encourage banks to increase their efforts to sell government bonds to residents, which will not only provide residents with more safe, liquid and profitable investment products, but also further unblock the various channels for converting savings into investments, reducing the cost pressure of Depositing banks.
Wang Qing, chief macro analyst at Oriental Jincheng, believes that the People’s Bank of China’s RRR cut, which is twice as large as in the past, will promote rapid credit growth in the first quarter. More importantly, it will release a signal that financial policy will increase efforts to stabilize growth, which will help improve credit growth, promote market confidence and consolidate the positive momentum of economic recovery. Wang Qingliao lowered the interest rate of the medium-term lending facility (MLF) by 0.1% to 0.2% in the first quarter of this year to reduce the LPR of 1-year and 5-year or higher types at the same time, stimulating consumption and investment demand .
Lin Junhong, director of the Shanghai Commercial Research Department, also said that there is an opportunity to reduce MLF and LPR in the first quarter, but the actual demand for loans on the mainland is not high at the moment, and the momentum of consumption began to slow down. at the end of last year The relevant mainland authorities need to introduce more policies to stimulate future use.
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Article: The People’s Bank of China cut reserve requirements by 0.5 percentage points to release trillions of dollars in real estate company pledges on operating properties, borrow money to repay debts, manage market value, and assess the heads of Hong’s central enterprises. Kong stocks rose 545 on the news, and the Financial Management Bureau of the People’s Bank of China took 6 measures to deepen financial cooperation and wealth management.2.0 Starting on the 26th of next month, brokers can participate in the extended eCNY pilot to facilitate Hong Kong people travel north to eat China Securities Regulatory Commission requires investors to increase their sense of gain Mainland China bans money from short selling stock index futures. The Dow Jones Industrial Average fell 99 points and the S&P 500 hit a new high of 4,900.
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