On April 13, after the establishment of two special re loans for scientific and technological innovation and inclusive pension was mentioned at the national standing committee meeting on April 6, The national Standing Committee proposed that "in view of the changes in the current situation, we should encourage large banks with high provision level to reduce the provision rate in an orderly manner, timely use the RRR reduction and other monetary policy tools, further strengthen the financial support to the real economy, especially industries seriously affected by the epidemic, small, medium-sized and micro enterprises, individual industrial and commercial households, reasonably transfer profits to the real economy and reduce the comprehensive financing cost". In this regard, we believe that in the recent repeated epidemic Under the background of weak economic operation, the RRR reduction may be implemented in the short term. At the same time, the central bank will further dredge the transmission mechanism of monetary policy and help release the real financing demand.
By reducing the bank reserve ratio, guide banks to increase credit. In March 2018, the CBRC issued the notice on adjusting the regulatory requirements for loan loss reserves of commercial banks, adjusting the regulatory requirements for provision coverage from 150% to 120% - 150%, and the regulatory requirements for loan provision ratio from 2.5% to 1.5% - 2.5%. Within the above adjustment range, the regulatory authorities at all levels defined the regulatory requirements for bank loan loss reserves in accordance with the principle of homogeneity, similarity and one bank, one policy. By the fourth quarter of 2021, the average provision coverage of large state-owned banks had exceeded 250%, and there was room for downward adjustment. The national standing committee meeting proposed to encourage large banks with high provision level to reduce the provision rate in an orderly manner, or based on the following two considerations: first, reducing the provision is conducive to the improvement of bank performance and the enhancement of bank capital replenishment capacity, so as to promote bank credit and accelerate the process of credit relief; Second, moderately relax the tolerance of non-performing loans, which is conducive to large banks to improve the scope of loans, cover weak areas in economic operation, and alleviate the financing pressure of small and medium-sized enterprises.
The pressure for steady growth drops and the quasi necessity rises, or it may actually land in April. At present, China's economic development still faces the triple pressure of "shrinking demand, supply shock and weakening expectation". Superimposed on the continuous spread of the epidemic in some regions, there are still uncertain factors in the process of economic repair. In March, the manufacturing PMI fell by 0.7 percentage points to 49.5% compared with the previous value. The overall economic operation is weak. Considering the goal of annual GDP growth of about 5.5% and the policy requirements of "moving forward", At this time, the necessity of moderate relaxation of monetary policy operation increases. At the same time, under the pressure of imported inflation, the production of middle and lower reaches enterprises, especially small and medium-sized enterprises, is under pressure. Superimposed on the impact of factors such as the epidemic, small and medium-sized enterprises are more vulnerable to the impact of the epidemic, and their profits may face greater downward pressure. Under this background, monetary policy may need to support small and medium-sized enterprises, further increase the necessity of RRR reduction, and provide long-term and stable low-cost funds for financial institutions to support entities. In addition, the Fed may accelerate the process of raising interest rates or further increase the pressure on overseas capital outflows. When monetary policy actively responds to China's external pressure, the central bank may reduce reserve requirements rather than interest rates to deal with the downward pressure on the economy. From the time point of RRR reduction and referring to historical experience, the central bank usually issues the announcement of RRR reduction in a relatively short time after the national Standing Committee mentioned the RRR reduction. 1. Superimposed on the impact of the recent repeated epidemic on the real economy, especially small and medium-sized enterprises, there is liquidity disturbance in the large-scale issuance of local bonds and tax payment. We believe that the central bank will issue the announcement of RRR reduction as soon as Friday and it will actually land in April.
