The monetary policy committee of the people's Bank of China recently held a regular meeting in the first quarter of 2022. The meeting analyzed the current economic and financial situation outside China and put forward the direction for the next step of monetary policy. The main concerns are as follows:
The current situation of "stable growth" in China is still the first serious one. From January to February this year, most macro indicators exceeded market expectations, and the overall economic situation showed a good trend. However, since late February, the escalation of geopolitical conflicts has led to a more complex external environment, with sharp fluctuations in the prices of crude oil, natural gas and non-ferrous finance, exacerbating the operating pressure of Chinese enterprises. At the same time, the frequency of outbreaks in China has increased, the pressure of epidemic prevention and control in some major economic provinces has increased sharply, and the normal operation of enterprises has been affected. The disturbing factors outside China facing the economic operation are still prominent. To this end, the meeting once again stressed that economic development is facing the triple pressure of shrinking demand, supply shock and weakening expectations, which means that the current economic situation has not changed significantly. Despite the improvement of macro data from January to February, under the influence of new changes in the situation outside China, the trend of economic improvement is facing uncertainty, and the time window for stabilization has not yet appeared clearly. "Steady growth" is still the most important work at present.
Second, we should enhance the foresight, accuracy and autonomy of the policy, and continue to give full play to the dual functions of the aggregate and structure of monetary policy. First, policy foresight will continue to increase. Across the board RRR cuts since December 2021, the monetary policy has been supporting the real economy from the two sides of the "quantity" and "price". The MLF has been lowered, the reverse repo rate has been lowered, the two LPR has been cut down, the 1 comprehensive reduction has been made, and the MLF has been extended over 1-3 months, providing greater financial support for the financial institutions and further increasing the credit supply. The meeting proposed to enhance the foresight of monetary policy, which means that monetary policy will adhere to the forward force and take the initiative to ensure the stability of total capital supply, and boost the confidence of market players through rapid response and effective action. Second, strengthen the use of structural monetary policy tools to achieve precision drip irrigation. Enhancing accuracy means that we will continue to play the leading role of structural monetary policy tools, continue to increase support for key economic areas and weak links, especially in the areas of inclusive small and micro enterprises, agriculture, rural areas and farmers, carbon emission reduction, scientific and technological innovation and green, and strengthen the drainage and supervision of funds to achieve precision drip irrigation. Third, monetary policy will continue to be "self dominated". Since this year, under the pressure of high inflation, the monetary policy of major economies has begun to tighten, especially the Federal Reserve has officially raised interest rates in March. As an economic power, China's monetary policy operation needs to ensure autonomy. In the future, China will continue to adhere to the principle of "focusing on itself" and focus on serving the overall situation of China's economic development. However, we should pay attention to the risks that may be caused by changes in external monetary conditions in time, reasonably guide market expectations and ensure the stable operation of China's financial market.
Third, continue to promote the structural reform of the financial supply side and serve the high-quality development of the economy. The meeting pointed out that "guide the service focus of large banks to sink, promote small and medium-sized banks to focus on their main responsibilities and businesses", "build an institutional mechanism to effectively support the real economy", "improve the financial support innovation system", "improve the green financial system", "promote the healthy development and virtuous cycle of the real estate market" and "promote a high-level two-way opening-up of finance", In the future, the financial supply side reform will focus on "total capital stability", "financing structure optimization", "prominent characteristic finance", "promoting financial opening" and "doing a good job in risk prevention", so as to further optimize the financial supply structure and improve the quality and efficiency of financial supply. Financial institutions need to continue to take the structural reform of the financial supply side as the main line of work, find the correct positioning, focus on the main business, highlight the advantages and make highlights, so as to better serve the development of the real economy.
