On April 6, 2022, the national standing committee released a number of important information. We believe that market players have increased due to changes in the epidemic situation. Stabilizing market players is to ensure employment. At present, the focus of monetary policy is credit. Credit is the most effective means to broaden credit and an effective way to promote enterprises to expand capital expenditure and prevent financial idling. The meeting proposed a number of broad credit instruments, among which the small re loan for supporting agriculture will provide low-cost funds for financial institutions. MPa's strengthening the assessment of manufacturing loans will promote the rapid growth of manufacturing loans. The special re loan credit orientation supports scientific and technological innovation and inclusive pension. In addition, the meeting also created loan demand through steady growth measures to stimulate credit supply. We believe that monetary policy tools tend to lower the reserve requirement in the second quarter, while the probability of interest rate reduction is low.
I. market players have increased due to changes in the epidemic situation
Recently, the epidemic situation in China has occurred frequently, and the national aggregated epidemic situation has occurred frequently. It is the largest local outbreak since the epidemic in Wuhan. Under the guidance of the zeroing policy, all cities have taken strict sealing and control measures to deal with it, which has a great impact on consumption and relevant market subjects. The current national standing committee meeting pointed out that "we must strengthen the guarantee of rescue and employment". We believe that the meeting further emphasizes helping market players to rescue and solve difficulties, aiming to release the positive signal of continuously helping enterprises to rescue and develop.
II. Stabilizing the main body of the market is to ensure employment
The national Standing Committee once again made it clear to ensure employment by stabilizing market players. China's market players are carrying hundreds of millions of jobs. At the end of 2021, under the triple pressure of shrinking demand, supply shock and weakening expectation, the market players are facing many challenges. Therefore, the government work report requires that macro policies mobilize a series of policies such as finance, employment, currency and taxation to stabilize the market players and ensure employment. Since the first quarter of 2022, the local epidemic has expanded, further impacting the operation of industrial production and service industry, putting pressure on market subjects and impacting employment, and the decision-making level has taken multiple measures to actively respond. On March 21, the national standing committee made it clear that efficient relief measures for various market subjects are the key measures to stabilize growth and stabilize market subjects and ensure employment, strengthen the implementation of the retention tax rebate policy, enhance the inclination of transfer payments, and strengthen the financial resources of grass-roots governments; The current national standing committee meeting called for greater relief and job security, the implementation of substantive relief measures such as delaying the payment of pension insurance premiums, extending the expansion policy of unemployment insurance, and increasing the proportion of job stabilization and return of unemployment insurance in small, medium-sized and micro enterprises. At the same time, provinces with greater impact of the epidemic have also actively introduced relief policies. Shenzhen issued "30 articles" of market relief on March 25, and Shanghai issued "21 articles" of market relief policies on March 29, focusing on implementing a number of measures such as tax reduction, rent reduction, deferred payment of social security and housing provident fund, reducing the cost of water, electricity and gas, and increasing support for specific industries.
III. The focus of monetary policy is credit
The current national standing committee meeting proposed: "timely and flexible use of a variety of monetary policy tools, give better play to the dual functions of aggregate and structure, and increase support for the real economy." We believe that the current policy intention of stabilizing growth through credit easing is still clear, and the focus of monetary policy is still credit easing. Credit is the most effective means to broaden credit and an effective way to promote enterprises to expand capital expenditure and prevent financial idling. This year, "expanding the scale of new loans" also appeared for the first time in the government work report, reflecting the determination of the policy level to stabilize credit and credit.
IV. providing low-cost funds for financial institutions by supporting agriculture and small-scale refinancing
The national standing committee pointed out the need to "increase small re loans for supporting agriculture". We believe that this move is mainly to provide low-cost funds for financial institutions, and then increase credit support for agriculture related, small and micro enterprises and private enterprises. It is also an important measure to stabilize market players and ensure employment. At present, the interest rate of one-year agricultural small refinancing is 2%, while the interest rate of one-year MLF is 2.85%. The former has obvious cost advantage. After the outbreak in 2020, the central bank increased the special amount of refinancing and rediscount by 500 billion yuan, and lowered the interest rate of small refinancing for agricultural support. The balance of small refinancing for agricultural support increased by 309.8 billion yuan at the end of the second quarter. It is expected that the amount of small refinancing for agricultural support will also increase significantly after the national standing committee meeting.
V. create loan demand through steady growth measures
The meeting pointed out that "we should put steady growth in a more prominent position, coordinate steady growth, adjust structure and promote reform, so as to stabilize the macro-economic market." We believe that the expected difference of this round of steady growth lies in that its way will be different from the past. Instead of taking traditional infrastructure real estate as the main driving force, it will take manufacturing investment and urban renewal as the main force of steady growth with strong chain supplement and industrial foundation reconstruction (industrial new energy and industrial intelligence) as the carrier. Therefore, in addition to the demand for infrastructure loans and mortgage loans will be released in the steady growth measures, the demand for medium and long-term loans and carbon reduction loans in the manufacturing industry will exceed expectations. It is worth noting that the national Standing Committee called for "improving the level of financial services for new citizens". We believe that new citizens attract new citizens such as migrant workers' family members such as the elderly and children through public service equalization measures, promote urbanization, create the demand for educational, medical and elderly care housing, and then support affordable housing, schools, hospitals and nursing homes through credit.
Vi. MPa strengthened the assessment of manufacturing loans and promoted the rapid growth of manufacturing loans
The national Standing Committee clearly requires to promote the rapid growth of medium and long-term loans in the manufacturing industry, which is in line with our early judgment that manufacturing investment is an important starting point for steady growth, but the biggest expectation difference of the market is that it underestimates the contribution of manufacturing investment. The second quarter of 2019 China's monetary policy implementation report issued by the central bank in August 2019 added the central bank's assessment of manufacturing loans of commercial banks. In the first quarter of 2020, the central bank further tightened the assessment of medium and long-term loans and credit loans in the manufacturing industry, including three dimensions: new scale, new proportion and year-on-year growth rate. We believe that the national Standing Committee proposed to "promote the rapid growth of medium and long-term loans in the manufacturing industry", further strengthen the macro Prudential assessment of the central bank's manufacturing loans, cooperate with local governments to implement the strong chain supplement and structural transformation driven by the "chain length system", and increase support for the transformation of new energy and intelligence in the manufacturing industry. We suggest that under the stable growth of new manufacturing, manufacturing investment is the main support for economic growth, and the annual growth rate is expected to reach 11.1%.
VII. Special refinancing credit directional support for scientific and technological innovation and inclusive pension
The meeting proposed to "set up two special re loans for scientific and technological innovation and inclusive pension, and the people's Bank of China will provide re loan support for the loan principal respectively", and the applicable objects of re loan tools will be expanded again. Promoting scientific and technological innovation, promoting industrial optimization and upgrading, breaking through the blocking point of supply constraints and improving the quality of development by relying on innovation are the guiding direction of China's policies. This year, the central bank has repeatedly proposed to guide financial institutions to increase their support for the real economy, especially small and micro enterprises, scientific and technological innovation and green development. From the perspective of this national standing meeting, the central bank currently supports small and medium-sized re loans, special re loans for scientific and technological innovation The targeted guidance and support of monetary policy tools for carbon emission reduction and structural tools such as special refinancing to support the clean and efficient utilization of coal will help to give full play to the dual functions of monetary policy in terms of aggregate and structure. With the intensification of China's aging, the demand for affordable and accessible elderly care services is increasing. However, for enterprises, elderly care services have large investment, long recovery cycle and low profit margin. The creation of special refinancing for inclusive elderly care will help to improve the enthusiasm of financial institutions to participate in inclusive elderly care projects. It is also a pain point in "improving the level of financial services for new citizens" mentioned at the meeting and solving the weak links in key areas.
VIII. Monetary policy instruments tend to lower the reserve requirement in the second quarter
The meeting pointed out that we should make timely and flexible use of a variety of monetary policy tools, give better play to the dual functions of aggregate and structure, and increase support for the real economy. We believe that "giving full play to the dual functions of aggregate and structure" is the continuation of the tone set in the government work report. In the future, the central bank will continue to adopt a variety of policy tools, just as the central bank stated at the financial data press conference on January 18 this year that "make sufficient efforts to expand the monetary policy toolbox" and our report "what tools are there in the monetary policy toolbox?" Judging from the above, we believe that the central bank currently takes steady growth as the primary goal and maintains the tone of prudent and slightly loose monetary policy. In the future, it will take multiple measures to stabilize growth, and there is a large room for loose policy tools. Considering the uncertainty of the impact of the epidemic on China's economic fundamentals, we believe that monetary policy tools tend to lower the reserve requirement in the second quarter. For the interest rate cut, we believe that the probability is small. The focus of the RRR cut is to broaden credit, and the focus of the interest rate cut is to reduce costs. The latter is not the current core demand, and the interest rate difference between China and the United States is facing periodic pressure, so the probability of further interest rate cut is limited.
Risk warning: the uncertainty of covid-19 virus epidemic situation is rising; The conflict between Russia and Ukraine escalated again; Natural disasters exceeded expectations.
