Core conclusion
In the second half of 2022, the aggregate monetary policy is expected to gradually change from the power accumulation period to the power generation period: 1) the unrealized MLF interest rate cut from March to April and the lower than expected standard reduction show that the aggregate policy is still in the power accumulation period: the implementation of the standard reduction, coupled with the adjustment of the self-discipline mechanism of deposit interest rate, enable commercial banks to further benefit the real economy. Furthermore, commercial banks can still reduce the LPR quotation interest rate by compressing the point spread. We believe that the operating range is lower than market expectations or related to external constraints such as the effect of the epidemic restricting policy, contingent inflationary pressure and the tight monetary policy of the Federal Reserve. 2) After the epidemic and the end of the external impact, the window of interest rate reduction may open again: the local government and commercial banks have opened the policy of meeting the reasonable housing demand, and the policy interest rate will probably be reduced by the central bank after the epidemic if the real estate sales still cannot recover. In addition, the central bank mentioned that the follow-up monetary policy needs to pay close attention to prices and the tightening of monetary policy in overseas developed economies. The policy interest rate can be reduced only after the necessity is very strong and the negative disturbance is cooled down.
Wide credit is still the most deterministic direction in 2022: policy is often the decisive factor affecting the annual monetary credit data. Under the background of steady growth, the probability of monetary credit data is gradually positive. 1) From the perspective of financing demand: the social finance and credit data in the first quarter showed a gradual warming trend. The credit expansion of government departments and enterprise departments is strong, and the credit of resident departments is mainly affected by the downturn of real estate sales, with a small increase year-on-year. 2) From the perspective of capital supply, especially the structure of new loans of commercial banks: the four major banks increased significantly year-on-year, and the new loans of small and medium-sized banks were weak. The sluggish real estate sales and the lack of new loans from small and medium-sized banks are the obstacles to the current credit expansion. The follow-up monetary policy should also focus on solving the above situation.
Outlook for monetary and credit environment in the second half of 2022: 1) social finance is at a high point or in the third quarter, and the credit structure is expected to improve significantly. It is estimated that social finance will increase by 33.2 trillion in 2022, and the growth rate of social finance will reach 11.2% in the third quarter and fall back to 10.6% at the end of the year. In the process of the peak and fall of the growth rate of social finance, the main body contributing to the year-on-year increase of social finance will also change. Credit, especially medium and long-term loans of enterprises and residents, is expected to take over government bonds and become the main source of social finance increment. 2) Structural instruments are still the key to credit easing, and structural monetary policy may be implemented in the near future: it is expected to increase the credit scale of 800 billion. Since the outbreak, structural monetary policy tools have become an important starting point for the people's Bank of China to maintain stable credit growth. Recently, the central bank provided the details of the newly established scientific and technological innovation refinancing and inclusive pension refinancing tools. The total scale of the two currently set is 240 billion yuan, superimposed with the clearly increased amount of small agricultural refinancing and the carbon emission reduction support tools that are used more than expected. The credit increment brought by structural monetary policy tools this year is expected to reach 800 billion yuan.
The fluctuation of RMB exchange rate may increase, and there is a risk of periodic depreciation. In 2021, China's export share was 2.1 percentage points higher than that in 2019, which made the domestic US dollar liquidity abundant. Then, while the US dollar index appreciated, the RMB exchange rate remained strong. In the second half of 2022, with the decline of domestic US dollar liquidity, the pressure of single-stage depreciation of RMB exchange rate increased greatly. In addition, after the rapid convergence of China US interest rate spread, the net outflow of overseas funds will also aggravate the short-term depreciation pressure of the exchange rate.
Risk tip: the decline of economic fundamentals exceeded expectations; China's monetary policy fell short of expectations
