Events
On March 8, the central bank's website showed that in accordance with the spirit of the central economic work conference and the deployment of the government work report, in order to enhance the available financial resources, the people's Bank of China turned over the balance profits to the central finance according to law this year, with a total amount of more than 1 trillion yuan, which was mainly used to offset tax rebates and increase transfer payments to local governments, support enterprise relief, stabilize employment and ensure people's livelihood.
Comments
Turning over the central bank's profits to the finance is an important means of coordinating financial resources and adjusting funds across years. This year, the fiscal deficit ratio will be reduced to 2.8%, However, according to the government work report, "the available financial resources have increased significantly as certain state-owned financial institutions and specialized institutions turn over their balance profits in recent years in accordance with the law. Coupled with the transfer into the budget stability adjustment fund, the scale of expenditure has increased by more than 2 trillion yuan over last year." Article 39 of the law of the people's Republic of China on the people's Bank of China stipulates that, "The net profit of the people's Bank of China after deducting the annual expenditure from the income of each fiscal year and withdrawing the total reserve according to the proportion approved by the financial department of the State Council shall be turned over to the central finance". Therefore, the turning over of the central bank's profits to the finance conforms to the provisions of Chinese law.
The income of the central bank mainly comes from the income on the asset side, including the foreign exchange reserve corresponding to the foreign exchange account. The foreign exchange reserve has operating income, and the central bank has interest on bank creditor's rights such as MLF and refinancing. The expenditure of the central bank mainly comes from the interest expenditure on the liability side, including the interest on Legal reserves, interest on excess reserves, interest on central bank bills, etc. the part where the income exceeds the expenditure is the annual profit. The balance profits handed over by the central bank are non tax revenue, so it will not cause a fiscal deficit. The people's Bank of China turns over the balance profits to the central finance according to law, which will not cause the finance to overdraw from the central bank.
Fiscal policy and monetary policy are "coordinated" easing. RRR reduction is to create broad money through the credit channels of commercial banks. If commercial banks do not expand the scale of credit, there will be no new deposits. Compared with the RRR reduction, the balance profits handed over by the central bank will not have a direct impact on inter-bank liquidity. The subsequent financial investment in the profits handed over by the central bank can make the funds directly enter the residents and enterprise sectors, and directly expand the amount of broad money. The 1 trillion profit turned in by the central bank is equivalent to a decrease of 1 trillion yuan in other liabilities and an increase of 1 trillion yuan in fiscal deposits, which will be used by the government to support the real economy. These fund arrangements are used to significantly increase local transfer payments and help local finance, especially county and district finance, alleviate the pressure of income reduction. Transfer payment funds will be incorporated into the direct mechanism management, which will quickly and accurately reach the grass-roots level of cities and counties and directly benefit enterprises and the people.
Risk tips: the overseas epidemic fluctuates more than expected, the downstream demand is less than expected, and the monetary policy changes.
