Premier Li Keqiang said he would reduce the reserve requirement in due time. When Premier Li Keqiang met with IMF President Georgieva via video on the afternoon of December 3, he pointed out that China will continue to coordinate epidemic prevention and control and economic and social development, implement stable macro policies and strengthen pertinence and effectiveness. We will continue to implement a prudent monetary policy, maintain reasonable and sufficient liquidity, formulate policies around the needs of market players, use a variety of monetary tools, timely reduce reserve requirements, increase support for the real economy, especially small, medium and micro enterprises, promote a steady decline in comprehensive financing costs, and ensure the stable and healthy operation of the economy. According to the historical situation, the RRR reduction is usually proposed in public or at the national standing committee meeting, and then the central bank officially announces the RRR reduction until the RRR reduction is implemented, which is roughly within two weeks. If the RRR reduction is implemented during the year, on the one hand, the economy may face certain downward pressure in the first quarter of next year. The release signal of RRR reduction reflects the importance of steady growth and the direction of cross cycle regulation; On the other hand, 950 billion yuan of MLF will expire in mid December, which does not rule out the possibility of replacing MLF through RRR reduction, similar to the RRR reduction in July; On the other hand, when the capital level may be slightly tight near the end of the year, the reserve requirement will be reduced to help the capital level cross the year smoothly. Overall, RRR reduction can reduce the cost of bank liabilities, guide the real economy to reduce financing costs, hedge the downward pressure of the economy, and benefit the equity market in terms of policy signals.
Manufacturing PMI returns above the boom and bust line. The Bureau of Statistics announced that China’s official manufacturing PMI in November was 50.1, an increase of 0.9 percentage points over the previous month, above the critical point, and the manufacturing industry returned to the expansion range. Overall, the PMI index in November was slightly better than the market expectation, indicating that China’s economic resilience still exists. Superimposing the marginal improvement signals of real estate development loans and personal mortgage housing loans since November, the end of real estate policy gradually appeared, releasing a certain stabilizing signal. The diffusion of covid-19 strain Omicron is still supported by external demand, and the export is still resilient, which promotes the repair of enterprise production capacity and the rise of inventory. Although new orders picked up in November, they are still in the contraction range, indicating insufficient demand. It is expected that the domestic demand in December may still be weak, and the PMI is a month on month concept. The sustainability of the supporting effect of the low base may be limited, and the downward pressure on the economy remains. The improvement sustainability of infrastructure investment and real estate rectification needs to be further observed.
The national development and Reform Commission solicited opinions on the signing of the long-term coal association in 2022. The national coal Fair held on December 3 announced the draft for comments on the signing and performance scheme of long-term coal contracts in 2022. The draft is formulated by the national development and Reform Commission, which specifies that the signing scope of the long-term coal association in 2022 will be further expanded, and coal production enterprises with an approved capacity of 300000 tons and above will be included in the signing scope in principle; On the demand side, power generation and heating enterprises are required to sign a long-term agreement for 100% of coal consumption other than imported coal. In terms of price, the pricing mechanism of “benchmark price + floating price” remains unchanged, but it is proposed that the long-term association of thermal coal in the new year will be adjusted every month. The adjustment range of 5500 kcal thermal coal is 550-850 yuan, of which the benchmark price of underground coal long-term association is 700 yuan / ton, an increase of about 31% compared with the previous 535 yuan. Generally speaking, the draft continued to adhere to the pricing mechanism of “benchmark price + floating price”, appropriately expanded the benchmark range of price, and reasonably reflected the actual cost level and supply and demand of the industry; The floating price increases the comprehensive price index of the national coal trading center to make the price operation more stable; Increasing the proportion of long-term contracts will contribute to the medium and long-term stability of coal prices and supply, avoid the adverse impact of large fluctuations in coal prices on the downstream, and maintain the stability of economic operation.
The market fluctuated upward this week. On the disk, coal, national defense and military industry and building decoration industries led the increase, while pharmaceutical and biological, textile and clothing and social service industries led the decline. The work plan for signing and performing medium and long-term coal contracts in 2022 was released this week, indicating that the pricing mechanism of “benchmark price + floating price” will still be adhered to. The market showed some performance last Friday, and the subsequent coal prices are expected to remain stable. In addition, Premier Li Keqiang’s speech at the weekend released the expectation of RRR reduction. According to past experience, RRR reduction is expected to be implemented within two weeks to further implement the goal of stable economic growth. In the medium term, the RRR reduction is good for the large financial sector and the equity market and bond market. The liquidity is expected to be reasonable and abundant from the end of the year to before the festival, and we are optimistic about the structural market before the festival.
The growth rate of covid-19 epidemic diagnosis continued to pick up around the world this week. As of December 4, there were 265 million confirmed cases of covid-19 pneumonia worldwide, 4.28 million more than the previous week and 359000 more than the previous week. Among the countries with more than 10000 new diagnoses this week, the countries with the highest increase in diagnoses were the United States, France and Spain. In China, as of December 5, 35 new cases had been diagnosed in China, down significantly from a week ago.
This week, 10 new fixed increase projects were approved by the CSRC, 4 by the development and Examination Commission, 11 by the general meeting of shareholders and 10 by the board of directors. As of Friday, 124 additional issuance plans priced by bidding were approved by the CSRC, 17 by the development and Examination Commission, 180 by the general meeting of shareholders and 73 by the board of directors.
