1. The central economic work conference set the tone for steady growth and first proposed the full implementation of the stock issuance registration system. The central economic work conference was held in Beijing from December 8 to 10 to summarize the economic work in 2021 and deploy the economic work in 2022. The meeting reiterated that "adhering to economic construction as the center". The overall tone of next year's work lies in seeking progress while maintaining stability. At the same time, the meeting proposed for the first time that "fully implement the stock issuance registration system". The recent central economic work conference and the meeting of the Political Bureau of the CPC Central Committee both released the signal of increasing the importance of steady growth. The marginal easing of real estate constraint policy and marginal easing of monetary policy are expected to bring opportunities for valuation repair of the financial sector.
2. The central bank lowered the deposit reserve ratio by 0.5 percentage points, and the comprehensive RRR reduction was implemented as scheduled. On December 6, the central bank announced that it decided to reduce the deposit reserve ratio of financial institutions by 0.5% on December 15, 2021. After this reduction, the weighted average deposit reserve ratio of financial institutions was 8.4%. Meanwhile, on December 7, the central bank lowered the refinancing interest rates for agriculture and small loans by 0.25 percentage points, and the three-month, six-month and one-year refinancing interest rates were 1.7%, 1.9% and 2% respectively. The overall RRR reduction is in line with market expectations, which is expected to release about 1.2 trillion long-term funds, and the static calculation is expected to increase the interest margin of listed banks by 0.7bp. Combined with the statement of the central bank, considering that China's economy is still facing the disturbance of the epidemic and the pressure brought by the downward real estate investment, we expect China's monetary policy to remain stable and loose.
3. The central bank released financial data in November, and the growth rate of social finance picked up. On December 9, the central bank released the financial data for November: the new scale of social financing was 2.61 trillion yuan, the market expected 2.81 trillion yuan, the previous value was 1.59 trillion yuan, and the year-on-year growth rate of social financing rebounded by 0.1 percentage points to 10.1%; In terms of money supply, M2 increased by 8.5% year-on-year, the market expected 8.7% year-on-year, and the former value was 8.7%; M1 increased by 3% year-on-year, and the former value was 2.8%.
4. The central bank raised the foreign exchange deposit reserve ratio to 9% to stabilize the expectation of unilateral appreciation of RMB. In order to strengthen the management of foreign exchange liquidity of financial institutions, the central bank decided to increase the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points from December 15, 2021, that is, the foreign exchange deposit reserve ratio will be increased from the current 7% to 9%. During the year, the central bank raised the foreign exchange reserve ratio for the second time in order to stabilize the expectation of unilateral appreciation of the RMB and slow down the inflow of short-term capital. Under the condition that the overall balance of payments pattern is still relatively stable, the RMB will not depreciate significantly, and the two-way fluctuation of RMB in the short term will increase.
