Why did the central bank choose new years day? Or related to the earlier spring festival this year

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 Why did the central bank choose new years day? Or related to the earlier spring festival this year


Photo by Zhang Xinglong, reporter of China News Agency

On January 1, the peoples Bank of China announced a comprehensive reduction in the standard to support the development of the real economy and reduce the actual cost of social financing.

From January 6, China will reduce the deposit reserve ratio of financial institutions by 0.5 percentage points (excluding financial companies, financial leasing companies and auto financing companies).

Different from several targeted reductions in recent years, the central bank has made a comprehensive reduction.

How to make great moves?

The head of the central bank said that the overall reduction reflected counter cyclical adjustment and released more than 800 billion yuan of long-term funds.

Officials said the reduction will effectively increase the stable sources of funds for financial institutions to support the real economy, reduce the cost of funds for financial institutions to support the real economy and directly support the real economy.

At the same time, the reduction of the standard will maintain a reasonable and sufficient liquidity, which is conducive to the realization of the growth of monetary credit and social financing scale in line with economic development, the creation of a suitable monetary and financial environment for high-quality development and supply side structural reform, and the use of market-oriented reform methods to dredge the transmission of monetary policy, which is conducive to stimulating the vitality of market subjects and further exerting the markets decision in resource allocation To support the development of real economy.

At this time, why is the accuracy reduced?

Mingming, chief fixed income analyst of CITIC Securities Research Department, said that the Spring Festival in 2020 is earlier than that in previous years, and the liquidity environment is faced with many factors, including: small amount of capital maturity pressure, significant increase in cash demand, strong uncertainty in the intensity and pace of tax payment, financial expenditure and special bond issuance, etc. The central banks liquidity arrangements for the Spring Festival will create a more stable capital interest rate by reducing the standard and operating in the open market.

Wen bin, chief researcher of China Minsheng Bank, said the overall reduction of 0.5 percentage point was in line with market expectations. In view of the fact that 600 billion yuan of reverse repo has been due in January, and the factors such as tax payment, issuance of special local government bonds, and cash demand during the Spring Festival, liquidity is under pressure. The 800 billion yuan released through the reduction of reserve can meet the above liquidity needs on the one hand, and on the other hand, the release of low-cost long-term funds is conducive to reducing the capital cost of banks and guiding banks to reduce the real economy financing Cost of capital. It is expected that the price of LPR in the new phase will decrease slightly on January 20, with the LPR of 4.1% in one year and 4.75% in more than five years.

Central bank officials said that the reduction increased the sources of funds for financial institutions. Large banks should focus on services. Small and medium-sized banks should focus more on their main responsibilities and businesses. They should actively use the reduction funds to increase support for small and micro enterprises and private enterprises.

In this comprehensive reduction, only urban commercial banks operating in the provincial administrative areas, rural commercial banks serving the county, rural cooperative banks, rural credit cooperatives and rural banks and other small and medium-sized banks have received more than 120 billion yuan of long-term capital, which is conducive to strengthening the capital strength of small and micro banks serving private enterprises based on the local and returning to the source. At the same time, the reduction of the standard reduces the banks capital cost by about 15 billion yuan per year. Through bank transmission, the actual cost of social financing can be reduced, especially the financing cost of small and micro enterprises and private enterprises.

Loose has become the global theme

In recent years, easing has become the main theme of monetary policy of major countries in the world.

Li Yang, member of the School Department of the Chinese Academy of Social Sciences and President of the national finance and development laboratory, said that we are experiencing the fourth wave of global debt. Major developed economies, including the United States, Europe, Japan, etc., in the face of the once-in-a-century financial crisis and the continuous downward trend of the economy, make full use of the privileges of their reserve currency issuers and implement the strategy of releasing water for currencies. We see that over the past decade, all reserve currency issuers, without exception, have adopted monetary easing strategies.

Li Yang said that the Federal Reserve reduced the federal funds rate to zero in 2008 and maintained it for four years. In 2016, Japan and Europe successively adopted negative interest rates. Global financial markets were dragged into an unprecedented negative interest rate trap by them. Major reserve currency issuers continue to release liquidity, which flows into non reserve currency countries continuously through international trade and capital flow channels, thus bringing the global economy and financial market into the situation of excess liquidity.

Zhu Min, President of the National Financial Research Institute of Tsinghua University, said that from a global perspective, when growth slows down, inflation is at a low level, and the monetary policy goals of central banks are difficult to achieve, the world will enter the interest rate reduction channel. According to statistics, central banks have cut interest rates hundreds of times this year.

In recent years, global inflation has remained low, Zhu said. The original inflation rate of emerging markets and developing economies is usually between 6% and 12%, and now it is down to 3% and 4%. The inflation rate of developed economies is below 2%, that of Europe and Japan is around 1%, which is below the standard of 2% of the central bank. Low inflation and slow growth give central banks reason and space to cut interest rates. Ten years after the financial crisis, the global economy has not fully recovered, and the overall interest level is still at a low level, but now it has entered the global interest rate reduction channel and low interest rate stage again, which is an important feature of the post crisis era.

Does Chinas monetary policy change?

In the global tide of central bank easing, does the central banks announcement of a comprehensive reduction in reserve mean that the orientation of monetary policy has changed?

In response, the central bank stressed that monetary policy orientation remained unchanged.

The central bank said that the reduction of the reserve ratio is a hedge against the cash investment before the Spring Festival, and the total liquidity of the banking system will remain basically stable, flexible and moderate, rather than flooding, which reflects the scientific and steady control of the counter cyclical adjustment of monetary policy, and the orientation of stable monetary policy has not changed.

It can be determined that China will continue to implement a sound monetary policy, maintain flexibility and moderation, avoid flooding, take into account internal and external balance, maintain reasonable and sufficient liquidity, adapt the scale growth of monetary credit and social financing to economic development, stimulate the vitality of market players, and create a suitable monetary and financial environment for high-quality development and supply side structural reform.

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