Events
On April 15, 2022, according to the news on the official website of the people's Bank of China, in order to support the development of the real economy and promote the steady decline of comprehensive financing costs, the people's Bank of China 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 deposit reserve ratio of 5%). In order to increase the support for small and micro enterprises and "agriculture, rural areas and farmers", for urban commercial banks without inter provincial operation and agricultural commercial banks with deposit reserve ratio higher than 5%, an additional 0.25 percentage point will be reduced on the basis of reducing the deposit reserve ratio by 0.25 percentage point. After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.1%.
Comments
The RRR reduction will effectively push down the financing cost of the real economy in Sichuan and Chongqing. Affected by overseas inflation and the continuous escalation of regional situation, since this year, global commodity prices have remained high, and energy such as oil and natural gas have increased significantly, resulting in a large increase in PPI transmitted to China. According to the data, in March, China's PPI increased by 8.3% year-on-year, of which Sichuan's PPI increased by 5.9% year-on-year and 0.5% month on month, and Chongqing's PPI from January to February increased by 5.2% year-on-year and 0.3% month on month. The middle and downstream industries of agriculture and manufacturing in Sichuan and Chongqing, especially the cost side of small and micro enterprises, continued to be under pressure. Superimposed on the disturbance caused by the outbreak of the epidemic in many places in China to the social and economic order, the operating pressure of small, medium and micro enterprises continued to increase. The central bank's rapid implementation of the 0.25 percentage point reduction will help to further strengthen financial support for the real economy, especially small, medium-sized and micro enterprises, promote the steady decline of enterprise financing costs in Sichuan and Chongqing, help enterprises overcome difficulties and ensure the stable operation of the real economy.
The RRR reduction will further strengthen the role of Finance in Supporting Rural Revitalization in Sichuan and Chongqing. The agricultural development in Sichuan and Chongqing is relatively comprehensive, among which grain and oil, pigs, vegetables, traditional Chinese medicine, citrus, lemon, pickle and other characteristic industries have advantages nationwide. Affected by the rising price of international chemical fertilizer, the agricultural cost is increasing. At present, it is sowing in spring. By reducing the reserve requirement, promoting the financial support for agriculture and reducing the agricultural financing cost, it can effectively supplement the fund gap of farmers and farms and help the agriculture in Sichuan and Chongqing maintain steady growth. On the other hand, under the construction of China's international double cycle consumption system, the sinking market has great potential and is an important source for China's consumption to achieve new growth. Promoting Rural Revitalization and revitalizing the rural economy will help the consumption market in Sichuan and Chongqing maintain rapid growth.
The RRR reduction will help the smooth progress of infrastructure projects in the Chengdu Chongqing twin city economic circle. It is estimated that 7.2 trillion yuan will be invested in the construction of energy, science and technology, Chengdu Chengdu Railway and other infrastructure projects, including the construction of Shuangcheng economic and technological innovation circle, Chengdu Chengdu Chengdu Railway and other infrastructure projects, with a total investment of about 3.0 billion yuan this year. The RRR reduction will help the smooth financing of infrastructure projects in the Chengdu Chongqing twin city economic circle, further reduce financing costs and benefit enterprises in new and old infrastructure related sectors in Sichuan and Chongqing.
Risk tip: the economic recovery is lower than expected, and there is a risk of covid-19 outbreak.
