Events
On March 21, 22, the central bank authorized the national interbank lending bank of China to announce the LPR in March: the quotation of one-year LPR was 3.7% and that of five-year LPR was 4.6%, both unchanged from last month.
Comments
LPR lowered expectations failed, and the central bank's total easing operation was more cautious. In March, it was announced that the 1-year and 5-year LPR had not been reduced, which was flat for two consecutive months. The interest rate cut fell short of our previous expectations, but partially met the market expectations. Previously, we stressed that due to the historically low net interest margin at the bank end and the lack of a stable source of liabilities, the certificate of deposit interest rate has increased significantly recently. Under the background that MLF has not been lowered, the probability of banks actively compressing LPR is small. At the same time, because the LPR interest rate cut is universal in the whole market and has obvious policy signal significance, the central bank has more concerns in guiding the LPR interest rate cut. At present, under the background that the external disputes between Russia and Ukraine have not been settled, the Federal Reserve has started to raise interest rates, and the internal epidemic continues to be disturbed, there are large variables in the internal and external situation, which is not the best time to cut interest rates. The cost performance of starting a comprehensive easing policy to help stabilize growth is not high.
Structural easing policies took the lead in landing and directly supported small and micro enterprises. In this year's government report, it is proposed to "give full play to the dual functions of the aggregate and structure of monetary policy tools to provide stronger support for the real economy". We believe that the current monetary policy has no strong willingness to release water, and mainly adopts entity direct and credit oriented operation. "It is estimated that the annual tax rebate and tax reduction is about 2.5 trillion yuan, of which the tax rebate is about 1.5 trillion yuan, and all the tax rebate funds go directly to enterprises". On the 21st, the Ministry of Finance issued a financial subsidy of 400 billion yuan for special transfer payments related to supporting small and micro enterprises to retain, offset and refund value-added tax for small and micro enterprises in 2022, so as to provide timely help for small and micro enterprises and stimulate their development vitality. The non refundable value-added tax will occupy the cash flow of enterprises for a long time and become a burden for enterprises. This direct financial policy can more conveniently increase the cash flow of enterprises, stimulate small and micro enterprises to carry out new capital expenditure and create vitality.
Wait for a more appropriate loose window. At present, the internal and external risks of the economy are greatly disturbed, and the follow-up still needs the force of aggregate policy to escort steady growth. At present, when the credit easing process is blocked, the real financing demand is weak, and the follow-up economic growth data is less than expected, the comprehensive interest rate reduction and other monetary policies can still be expected, and there is still a loose window period in the second quarter. At present, the demand for real estate continues to be sluggish, and some residents' expectations of rising house prices decline. In the follow-up, we will continue to pay attention to the trend of real estate policies, especially for the marginal relaxation of demand side policies in the third and fourth tier cities with great downward pressure on house prices, and accelerate the construction of affordable housing. We believe that if the real estate continues the downward trend, we can not rule out reducing the five-year LPR to release the policy signal and help the real estate sales. In addition, there is also the possibility of RRR reduction in April. The RRR reduction can directly reduce the cost of bank liabilities. The two comprehensive RRR reductions in July and December last year saved 33 billion yuan for banks. Although in June last year, commercial banks adjusted the way to determine the self-discipline upper limit of deposit interest rate, changing from the multiple mode of benchmark interest rate to the mode of benchmark interest rate + base point, guiding the general decline of long-end deposit interest rate and saving bank costs. However, from the data, the current net interest margin of banks is still low. If the reserve requirement reduction can increase the space for banks to continue to make profits for the real economy in the future.
