event:
On December 6, the people's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on December 15, 2021 (excluding financial institutions that have implemented the 5% deposit reserve ratio). The Political Bureau of the CPC Central Committee held a meeting on December 6 to analyze and study the economic work in 2022.
comment:
1. The RRR reduction is implemented as scheduled, or more may be expected
On December 3, Premier Li Keqiang proposed "timely RRR reduction" when meeting with the president of the International Monetary Fund in Ziguangge video of Zhongnanhai, which raised the market's expectations for RRR reduction. Therefore, it was not unexpected for the central bank to announce the implementation of RRR reduction on Monday, which was also in line with the judgment we had repeatedly mentioned that with the peak of PPI, the realization of broad currency is worth looking forward to. The overall RRR reduction released about 1.2 trillion yuan of funds and reduced the capital cost of financial institutions by about 15 billion yuan a year, which was slightly higher than the 1 trillion yuan and 13 billion yuan reduced in July. According to the explanation of the central bank, the main reason for the scale increase is that most financial institutions participating in the assessment of targeted RRR reduction of Inclusive Finance have met the assessment standards of supporting agriculture and small expenditure (including individual industrial and commercial households), the policy objectives have been achieved, and the relevant financial institutions have uniformly implemented the most preferential deposit reserve rate.
For the purpose of this RRR reduction, the central bank proposed to "effectively increase the long-term stable source of funds for financial institutions to support the real economy" and "guide financial institutions to actively use the RRR reduction funds to increase their support for the real economy, especially small, medium and micro enterprises". Compared with the statement of the RRR reduction in July, this time more emphasis is placed on the support of the RRR reduction for the real economy, This means that this RRR reduction contains more intentions to stabilize growth. Earlier, on November 18, Premier Li Keqiang proposed at the entrepreneurs' forum that "there are new downward pressures on China's economy, and there are many challenges to continue to maintain stable operation on a high base". Subsequently, the central bank proposed in the third quarter monetary policy implementation report that "it is more difficult to maintain stable operation of the economy". The relevant statements reflect that with the continuous emergence of downward pressure on the economy, The central government's demand for steady growth has increased, which has driven the market to increase the expectation of adding weight to the steady growth policy.
For the impact of this RRR reduction, the key question is whether this RRR reduction is good for the market or can we expect more easing. Considering the GDP growth rate of 4.9% in the third quarter of this year, the GDP growth rate in the fourth quarter may break through four. At the same time, the market's expected average GDP growth rate for the whole year next year is 5.3%, while the central bank's prediction of China's potential growth rate next year in its paper in March is 5.5%. In the case that the annual growth rate of next year may be lower than the potential growth rate, and the recent policy emphasizes the downward pressure on the economy, we think it is reasonable to expect more easing policies, including interest rate cuts, to be introduced in the future.
