Event: on April 15, the people's Bank of China announced that it would reduce the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, 2022. 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%.
Comprehensive and directional RRR reduction are combined. The central bank announced that it would cut the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25, and cut an additional 0.25 percentage point for urban commercial banks that do not operate across provinces and agricultural commercial banks with deposit reserve ratio higher than 5%. In terms of strength, the overall reduction of standards is not large, but the additional targeted reduction is adopted, which is highly targeted, reflecting the increasing support of policies for small and micro enterprises and "agriculture, rural areas and farmers". This RRR reduction released about 530billion yuan of long-term funds, which was less than the level of the RRR reduction in December last year. At that time, 1.2 trillion yuan of liquidity was released. However, considering that this RRR reduction was coordinated with the adjustment of the upper limit of deposit interest rates, the overall strength of the policy was acceptable. The funds released from this RRR reduction will be used to supplement the long-term funds of financial institutions, the capital allocation capacity of financial institutions will be enhanced, and the cost of financial institutions will be reduced, so as to further strengthen the financial support to the real economy, especially industries and small, medium and micro enterprises seriously affected by the epidemic.
Loose overweight under multiple pressures. The recent domestic epidemic in China, international geopolitical events and overseas tightening have brought new growth pressure to China's economy. On the one hand, there is no inflection point in the spread of domestic epidemic in China, and the sealing and control measures have an impact on economic activities. High frequency data show that both supply and demand are weakened; On the other hand, the growth rate of import and export both fell in March. Under the pressure of foreign trade, the supporting role of export to the economy tends to decline. In addition, although the financial data in the first quarter were relatively bright, structurally, the credit growth supported by short-term loans from the enterprise sector alone may not be sustainable, and the demand for physical financing is still weak. In February this year, the urban survey unemployment rate has also risen to 5.5%, and the employment situation of residents is not optimistic, which makes expectations weaker again. Therefore, although the monetary policy of overseas developed economies represented by the United States continues to tighten, under the pressure of multiple pressures, it is still necessary for China's easing policy to work again.
RRR reduction matched loan growth. In the context of the increasing downward pressure on the economy, the RRR reduction can stabilize the expected effect to a certain extent. However, considering that the situation of the local epidemic in China is still uncertain and the risks in the real estate industry have not been fully released, if we want to achieve the goal of annual economic growth, we still need more cooperation of stable growth policies. In particular, in terms of credit easing measures, the national standing committee also mentioned that "large banks with high provision level are encouraged to reduce the provision rate in an orderly manner". The credit extension capacity of large banks is expected to be improved, and the loan support to small and medium-sized enterprises and weak areas will be enhanced, which is consistent with the tone of recent policies focusing on credit growth. The central bank said that two new special refinancing lines of 240 billion yuan were arranged to support the rolling use of 400 billion yuan of inclusive small and micro credit loans. If necessary, the refinancing line can be increased. The RRR reduction combined with credit easing will form a joint force for stabilizing economic growth. From the perspective of the pressure of the economic environment, there is the possibility of following up with interest rate cuts in the short term, but the frequency and range are afraid to be limited: on the one hand, the pace of interest rate increase and reduction by the Federal Reserve has accelerated, the interest rate gap between China and the United States has also been upside down recently, the RMB is under the pressure of devaluation, and China may not have the loose space to continue to reduce reserve requirements and interest rates for many times; On the other hand, the crux of the current economy lies in the weakness of aggregate demand. Monetary policy has taken the lead, and the cooperation and implementation of other demand side support policies is the key to hedge the downward pressure on the economy.
It can solve the near worries without removing the foresight. Restricted by the continuous tightening of external monetary policy, the probability of continuous reduction of reserve requirements and interest rates may be small, which determines that the time window of allocation is more important for the capital market. In the short term, the RRR reduction combined with the adjustment of deposit interest rate quotation has alleviated the pressure on the bank's liability side, promoted the decline of capital cost, and benefited the bond market greatly. While the epidemic has not been eliminated, the short-term A-shares may still continue the shock adjustment trend. The undervalued and high dividend sectors are relatively dominant, and the opportunity may come only when the epidemic improves.
Risk tip: policy changes, economic recovery is less than expected.
