Events
On April 13, 2022, the people's Bank of China issued an announcement and decided to reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022 (excluding financial institutions that have implemented the 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.
Comments
The RRR reduction helped the steady growth of the real economy. At present, China is deeply disturbed by the epidemic. Especially since March, the epidemic situation in the eastern coastal areas and Jilin is severe, the transportation and construction are limited, the demand for physical financing is insufficient, the enthusiasm of enterprises for production and investment is not high, and the supply and demand ends are weakened. This epidemic can be said to have the greatest impact after the beginning of 2020, which will undoubtedly drag down the GDP growth in the first quarter, The necessity and urgency of the steady growth policy have increased rapidly. The government work report at the two sessions this year set the GDP growth target at about 5.5%, but at present, China's economy is being impacted by many uncertain events outside China, and there is still some pressure to achieve the target of 5.5. The RRR reduction can further increase financial support for the real economy, especially industries seriously affected by the epidemic, small, medium-sized and micro enterprises and individual industrial and commercial households, and can significantly help enterprises to bail out. The RRR reduction created a more suitable financing environment, stabilized the business expectations of small, medium-sized and micro enterprises, and finally helped enterprises tide over difficulties.
The cost reduction on the bank's liability side is expected to be transmitted to the asset side. For banks, RRR reduction can release long-term and cost-free liquidity for commercial banks, so that financial institutions can reduce the cost of debt, improve the enthusiasm of credit supply and reduce the financing cost of the real economy. Although the current cycle of China's monetary policy is misplaced with that of the United States, the Central Bank of China still adheres to the principle of "giving priority to me" in its monetary policy, and steady growth is China's current primary goal. The Fed's interest rate hike cannot change the "giving priority to me" situation of China's monetary policy, and is not enough to change the loose direction of China's monetary policy.
The RRR reduction is good for stocks and bonds. In the short term, there are certain disturbances in China's economic repair, which is subject to certain constraints. This RRR reduction can alleviate the adverse impact of the epidemic on China's economy and boost the growth of the real economy. China's economy will also usher in marginal repair and increase the opportunities of the equity market. The RRR reduction released a total of about 530 billion yuan of long-term funds, providing market liquidity. The subsequent easing policy is still likely to continue to increase. Under the expectation of loose monetary policy, the bond market will usher in structural opportunities.
Risk tips: the overseas epidemic fluctuates more than expected, the downstream demand is less than expected, and the monetary policy changes.
