Opinions issued by the State Council Office: further release the consumption potential and promote the sustained recovery of consumption
On April 25, the general office of the State Council issued the opinions on further releasing consumption potential and promoting sustainable recovery of consumption (hereinafter referred to as the opinions).
The opinions proposed that we should strengthen the efforts to help enterprises and deeply implement the tax rebate and fee reduction policies to support manufacturing, small and micro enterprises and individual industrial and commercial households. We will promote the financial system to transfer profits to the real economy through various measures such as reducing interest rates and fees. Guide financial institutions to optimize credit management, provide financing support to industrial enterprises seriously affected by the epidemic, and avoid industrial loan restrictions, loan withdrawal and loan interruption.
We should ensure consumption and supply and promote new consumption. It is planned to build a batch of suburban warehouse bases integrating warehousing, sorting, processing, packaging and other functions, which can ensure the timely transfer of important materials in case of emergency. It is encouraged to provide land for express logistics enterprises by means of lease before concession and combination of lease and concession. At the same time, we will accelerate the cultivation and construction of international consumption center cities, improve the policy of duty-free shops in the city, and plan to build a number of duty-free shops in the city with Chinese characteristics.
Stabilize the basic price of consumption. Establish and improve the county town oriented and village oriented business system. Encourage new energy vehicles and green smart appliances to go to the countryside. We will actively promote the upgrading of physical consumption and promote the upgrading of health and elderly care consumption.
Create a safe and trustworthy consumption environment. We will remove barriers to restricting consumption and promote the coordination and unification of standards, rules and policies in different regions and industries. The opinions stressed that we should steadily increase automobile and other bulk consumption and relax restrictions on car purchase. Encourage purchase restriction areas other than individual mega cities to implement index differentiation policies. At the same time, the policy of restricting the relocation of second-hand cars will be completely abolished, and the inter provincial measures for the registration of small non operating second-hand car transactions will be implemented. Relax the restrictions on pickup trucks entering the city and implement fine management.
Overall, the epidemic has impacted China’s economy. China’s total retail sales of social consumer goods fell by 3.5% year-on-year in March. The recovery of consumption is further under pressure, and the downward pressure on the economy is increasing. It is expected that with the effective control of the epidemic, the economic order will be steadily restored and the consumption level will gradually rise.
The central bank lowered the foreign exchange deposit reserve ratio of financial institutions
The central bank decided to reduce the current foreign exchange reserve ratio of financial institutions from 8% in 2029 to 15% in 2025.
According to the amount of foreign exchange deposits of financial institutions in March was 1.05 trillion yuan, which is expected to release us $10 billion of liquidity. In 2021, the central bank raised the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points on June 15 and December 15 respectively, and the foreign exchange deposit reserve ratio also increased from 5% to 9%. The market also responded quickly, and the continuous appreciation of the RMB against the US dollar was suspended.
Since April, the depreciation of RMB has accelerated. On April 20, the spot exchange rate of RMB against the US dollar fell below the 6.4 mark to close at 6.4153. On April 25, the RMB continued its decline since last week. The offshore RMB fell below the 6.6 mark against the US dollar, a new low since November 2020. After the central bank announced the reduction of the foreign exchange deposit reserve ratio, the onshore RMB / US dollar exchange rate rose to 6.54 from around 6.57. The offshore RMB rose more than 300 points against the US dollar in the short term.
Overall, the reduction in the foreign exchange reserve ratio of financial institutions released the signal of stabilizing the exchange rate. Affected by the recent interest rate hike by the Federal Reserve and the increasing downward pressure on China’s economy, the RMB exchange rate is under pressure to depreciate in the short term. However, in the medium and long term, China’s basic orientation is good, the price level and inflation level are low, the economic growth remains stable, and the RMB exchange rate is expected to remain relatively stable.
The financing balance decreased. On April 22, the balance of A-share financing was 1516984 billion yuan, a month on month decrease of 12.632 billion yuan; The balance of margin trading was 1 Yantai Yuancheng Gold Co.Ltd(600766) million yuan, a month on month decrease of 13.186 billion yuan. The balance of financing minus securities lending was 1433202 billion yuan, a month on month decrease of 12.077 billion yuan.
Net outflow of lugutong. On April 25, luchutong sold a net 4.397 billion yuan on that day, including 54.911 billion yuan of purchase and 59.309 billion yuan of sale, with a cumulative net purchase of 1607038 billion yuan. Hong Kong stock connect sold a net HK $296 million on the same day, including a purchase transaction of HK $14.161 billion and a sale transaction of HK $14.458 billion, with a cumulative net purchase transaction of HK $2289707 billion.
Money market interest rates fluctuated. On April 25, the weighted interest rate of pledged repo of deposit institutions was 1.3056% overnight, up 0.30bp, 1.6323% a week, down 11.95bp. The yield to maturity of China national debt was 2.8160% for the 10-year term, down 1.75bp.
European and American stock markets fluctuated. On April 25, the Dow Jones Industrial Average closed at 3404946 points, up 0.70%; The S & P 500 index closed at 429612 points, up 0.57%; The NASDAQ index closed at 1 Beijing Science Sun Pharmaceutical Co.Ltd(300485) , up 1.29%. European stock markets, French CAC index closed at 644938 points, down 2.01%; Germany’s DAX index closed at 1392417 points, down 1.54%; The FTSE 100 index closed at 738054, down 1.88%. In the Asia Pacific market, the Nikkei index closed at 2659078 points, down 1.90%; The Hang Seng Index closed at 1986934, down 3.73%.
The dollar index rose. On April 25, the dollar index rose 0.6198 to 1017431. The spot exchange rate of RMB against the US dollar closed at 6.5544, depreciating 669 BP. The spot exchange rate of offshore RMB against the US dollar closed at 6.5716, depreciating 442 BP. The central parity rate of RMB against the US dollar closed at 6.4909, down 313 BP. The euro fell 0.81% against the dollar to 1.0713. The dollar fell 0.36% against the yen to 1281345. Sterling fell 0.77% against the dollar to 1.2740.
Gold fell, crude oil fell and Lun copper fell. On April 25, Comex gold futures fell 1.82% to close at US $189910/oz. WTI crude oil futures fell 3.38% to close at US $98.62/barrel. Brent crude oil futures fell 3.55% to close at US $102.63/barrel. LME copper three-month futures fell 2.71% to close at US $9837 / ton.
