There is room for forward-looking monetary policy to adjust the aggregate structure
2024-03-13
Significant measures such as lowering reserve requirements and lowering the LPR (Loan Market Quotation Rate) for loans with a maturity of more than 5 years have emerged one after another. In 2024, monetary policy has been forward-looking, and financial stability has continued to strengthen. Looking ahead to the next stage, this year's government work report points out that "maintaining reasonable and sufficient liquidity" and "vigorously developing technology finance, green finance, inclusive finance, pension finance, and digital finance". According to the signal released by the People's Bank of China, both in terms of total volume and structure, monetary policy will further strengthen, and there is still room for further reserve requirement reduction. Structural monetary policy tools will also play a greater role in supporting key areas. Lowering the interest rates for agricultural and small scale re loans and rediscounting by 0.25 percentage points to reduce the cost of bank funds; The statutory reserve requirement ratio will be lowered by 0.5 percentage points, releasing approximately 1 trillion yuan of medium and long-term liquidity; A decrease of 0.25 percentage points in LPR for a period of 5 years or more... A series of heavyweight monetary policy tools have been implemented one after another, reflecting the main tone of this year's monetary policy being "flexible, moderate, precise and effective". In the view of Wen Bin, Chief Economist of Minsheng Bank, this year the People's Bank of China has increased its efforts in countercyclical regulation and put forward efforts, mainly to consolidate and improve market confidence and the trend of economic recovery, and to do a good job in countercyclical regulation in advance. With policy support, reasonable and sufficient liquidity will lay a solid foundation for stable growth, expanding domestic demand, and stimulating market vitality this year. The successful start of the first month's financial data also confirms the strong financial support for the real economy. According to data from the People's Bank of China, both new credit and social financing data in January reached historical highs for the same period. Among them, RMB loans increased by 4.92 trillion yuan in January, an increase of 16.2 billion yuan year-on-year; The increase in social financing scale in January was 6.5 trillion yuan, an increase of 506.1 billion yuan compared to the same period last year. Looking ahead to the whole year, industry insiders generally believe that monetary policy in 2024 will prioritize both quantity and structure. The President of the People's Bank of China, Pan Gongsheng, recently stated at the economic themed press conference of the Second Session of the 14th National People's Congress that the current average statutory reserve requirement ratio is 7%, and there is still room for further reserve requirement reduction. We will comprehensively utilize various monetary policy tools, increase countercyclical adjustment efforts, maintain reasonable and sufficient liquidity, support stable growth and balanced allocation of social financing scale and total monetary credit. He also emphasized that China's monetary policy toolbox is still abundant, and there is still enough room for monetary policy. Regarding the timing of the reserve requirement reduction, Wang Qing, Chief Macro Analyst of Oriental Jincheng, predicts that both the reserve requirement reduction and the MLF (Medium Term Lending Facility) interest rate cut in the second quarter may be implemented. From a structural perspective, monetary policy places greater emphasis on improving efficiency. Among them, doing well in the five major articles is not only an important focus on providing high-quality financial services for the development of the real economy, but also an important content of deepening the structural reform of the financial supply side. The government work report once again clarifies the need to vigorously develop technology finance, green finance, inclusive finance, pension finance, and digital finance, clarifying the direction for financial support entities. Around this main line, structural monetary policy tools will play a greater role. According to Pan Gongsheng, this year the People's Bank of China will establish re loans for technological innovation and transformation to support high-end manufacturing and digital economy
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