Event:
On March 8, the central bank announced that this year, the people's Bank of China handed over the balance profits to the central government in accordance with the law, with a total amount of more than 1 trillion yuan, which is mainly used to offset tax rebates and increase transfer payments to local governments, support enterprise relief, stabilize employment and ensure people's livelihood.
Comments:
From the balance sheet of the central bank, the balance profit of the central bank should be recorded in the subjects other than the reserve currency on the liability side. If the profit itself is recorded under the government deposit account, the action of the central bank handing over the balance profit to the central finance will not cause changes in various items on the liability side, otherwise the scale of a liability account will be reduced, The scale of government deposits increased. However, it will not change the scale of reserve currency, that is, it will not increase the liquidity of commercial banking system. Since then, with the fiscal expenditure, the government deposits in the central bank's table will be transformed into the deposits of commercial banks in the central bank under the reserve currency, that is, the reserve currency will increase, the liquidity of commercial banks will improve, and there will be more abundant funds to carry out credit expansion.
It can be seen that although the central bank's profits of more than $1 trillion are turned over this time, from the result of the final increase in the base currency, it can be similar to a 50bp comprehensive RRR reduction, but the process of money supply is obviously different. The RRR reduction directly increases the scale of basic money available to commercial banks, and inter-bank liquidity directly benefits. However, entity benefits need to be through the process of bank credit. The actual degree of credit expansion is uncertain, which depends on factors such as entity financing demand, and the improvement of entity enterprise liquidity is at the cost of the increase of debt scale. The central bank's profits are turned over to directly support fiscal expenditure and then increase entity income. This process does not increase government or enterprise debt, which is somewhat similar to the settlement of foreign exchange after enterprises obtain foreign exchange income and the central bank's investment in foreign exchange to increase the base currency of commercial banks. At the same time, for the liquidity of the commercial banking system, the positive effect of the central bank's profit turned over to the Finance on the liquidity is relatively indirect. First, the central bank proposes that the balance profit should be turned over in a balanced manner on a monthly basis, that is, the rhythm is not one-time investment, but evenly distributed on a monthly basis, the time cycle is lengthened, and the actual investment scale will face the uncertainty of the subsequent adjustment of the central bank's open market operation. Second, As mentioned above, in terms of procedure, 1 trillion needs to go through fiscal expenditure before entering commercial banks to form the base currency, which also faces some time uncertainty.
Based on the above analysis, we believe that the profit handed over by the central bank is direct and powerful in supporting the fiscal expenditure, and the improvement of the liquidity of commercial banks is more indirect than the RRR reduction, and the profit handed over also reduces the probability of implementing the RRR reduction in the near future to a certain extent. Therefore, it is expected to be more favorable to the credit and economic expectation than to the currency and liquidity.
