This week, the one-year LPR was lowered by 0.5 percentage points, and the liquidity gap in December was small. At this time, the interest rate cut was intended to accumulate power for "stable growth". The Standing Committee of the people's Republic of China requested to do a good job in the implementation of RCEP after its entry into force, and pay attention to the support of RCEP contracting countries represented by ASEAN for China's import and export trade.
In China, the interest rate cut fell this week. On December 20, the one-year LPR was 3.8%, down 0.05 percentage points from the previous period, the first reduction since March 2020; The LPR over 5 years was 4.65%, which remained unchanged. It is worth mentioning that before the LPR reduction, the central bank did not adjust the MLF interest rate in the middle of the month. The LPR quotation reduction should be the result of the guidance of two RRR reductions in the year.
In December, the liquidity gap was small, and the interest rate cut was intended to accumulate power for "steady growth". From the perspective of fiscal revenue and expenditure, although December is the usual tax month, fiscal expenditure in that month will also strengthen seasonally. Public fiscal expenditure in December 2018-2021 is the highest in that year, which is expected to form an effective supplement to the liquidity environment. In terms of government debt financing, as of November, a total of 3.48 trillion yuan of new local government special bonds had been issued. There was little pressure on the supply of government bonds during the year, and the government deposits did not occupy a strong narrow sense of liquidity. Combined with the relief of the payment pressure of the banking system caused by the RRR reduction in December, the liquidity gap in December was small. The confirmation of interest rate cut at this time point further reflects the country's determination to "stabilize growth" next year.
The regular session of the State Council was held this week, calling for the deployment and implementation of the regional comprehensive economic partnership agreement after its entry into force. RCEP member countries occupy an important position in China's trade structure. From January to November this year, the import and export trade volume between China and RCEP member countries reached US $169471706 million, accounting for 31% of the total import and export trade in the same period. In addition, the import and export trade between China and RCEP member countries has maintained a rapid growth rate in the past two years, with a compound growth rate of 14.45% from January to November. The RECP has officially come into force, which is expected to form an effective support for China's import and export trade.
Looking overseas, US economic data are mixed. On the one hand, according to the data of the U.S. Department of Commerce, the initial month on month value of U.S. durable goods orders in November was 2.5%, higher than the market expectation, and the previous value was - 0.4%. In terms of employment, according to the data of the U.S. Department of labor, the number of initial claims for unemployment benefits in the United States was 205000 in the week ended December 18, which decreased slightly again compared with last week, and the employment and consumption data were repaired. On the other hand, the inflationary pressure in the United States is further highlighted; On Thursday, the PCE price index of the United States in November was released, with a year-on-year increase of 5.7%, a new high since 1982; Core PCE increased by 4.6% year-on-year, further increasing compared with the previous value of 4.1%, reaching a new high since 1989; Higher inflation may further strengthen market concerns about raising interest rates.
In terms of epidemic situation, the British health and Safety Bureau said this week that the possibility of hospitalization of Omicron infected persons is 50% to 70% lower than that of delta infected persons, and the possibility of emergency treatment is 31% to 45%. Studies by the National Institute of infectious diseases of South Africa and Imperial College London also showed that the probability of hospitalization and severe illness caused by Omicron decreased. In addition, covid-19 oral drug of MSD was approved for high-risk people, and the market's concern about Omicron epidemic was alleviated. In the first few trading days of this week, the overseas market was relatively active.
Risk tip: global inflation is rising too fast; Liquidity flows back to US debt; The impact of the global covid-19 epidemic has expanded.
