Key points
Event: the people's Bank of China authorized the national interbank lending center to announce that the quoted interest rate (LPR) of the loan market on May 20, 2022 is: 1-year LPR is 3.70%, and more than 5-year LPR is 4.45%. Among them, the LPR over 5 years is 15 basis points lower than the last time.
Core view: the LPR over five years is 15 basis points lower than the last time, and the reduction of loan interest rate is significantly higher than the market expectation, which mainly reflects the increasing pressure on the real economy and urban employment under the disturbance of repeated epidemic and other internal and external factors, and the financing data representing the expectation of the real sector also shows an overall slowdown trend. At the same time, the financing of real estate and other sectors has shrunk sharply, It will also gather financial risks to a certain extent. Therefore, there is a need for unconventional and effective policies to reverse the expectations of residents and enterprise departments as soon as possible and help residents and enterprise departments rebuild confidence.
The sharp decline of loan interest rate can significantly reduce costs and improve the balance sheet. It can also reverse the expectations of the real sector and stimulate the consumption and investment willingness of micro entities to a certain extent. However, the complete reversal of the expectations of the real sector still needs more supporting policies on the demand side to be implemented as soon as possible. We expect that monetary policy will remain loose and decide whether to further guide the LPR downward depending on the disturbance of the epidemic to the economy.
I. the pressure on the real economy and urban employment is increasing. Financing data show that residents and enterprise sectors are expected to continue to weaken, and extraordinary measures are needed in extraordinary times
Disturbed by internal and external factors such as repeated outbreaks in China, the pressure on the real economy and urban employment is increasing, and the financing data representing the expectation of the real sector also shows a comprehensive slowdown. Under the background of the expected slowdown of the real estate sector and the external demand of non residents, it means that the confidence of enterprises in the internal and external financing sectors may be reversed as soon as possible. Meanwhile, in April, the central bank led the establishment of a market-oriented adjustment mechanism for deposit interest rates, which has helped commercial banks and other financial institutions reduce the cost of deposit liabilities by 10bp and reserved sufficient space for a substantial reduction in loan interest rates.
China's cities and towns are facing increasing pressure from recession and economic disturbance. Since March, China's epidemic has disturbed economic centers such as Guangdong, Shanghai and Beijing. The epidemic prevention and control will inevitably have a negative impact on offline production, circulation and consumption. The manufacturing PMI, which represents the prosperity of the real economy, began to weaken in March and fell sharply in April. Under the background of the cyclical slowdown of external demand and the sudden contraction of domestic demand disturbed by the epidemic, the real economy data in April basically weakened in an all-round way. At the same time, the phased pressure faced by the real economy began to transmit to the employment end. The unemployment rate in March began to rise significantly beyond the seasonality. The unemployment rate in April even exceeded the same period in 2020. Close to the worst period of the epidemic in 2020, the pressure on China to stabilize growth and ensure employment has increased significantly.
The pressure on the real economy and urban employment is reflected in the financing data, that is, the financing data slowed down in April. At the same time, enterprises and residents are the main body of social financing, and the government financing is difficult to support. Under the disturbance of the epidemic, the real economy is under overall pressure, and the willingness of the enterprise sector to invest and expand production and the willingness of the resident sector to consume and buy houses have shrunk significantly. In terms of financing data, the pulling effect of the enterprise sector on new financing has shrunk significantly month on month, and the resident sector has maintained drag for six consecutive months, and the drag degree has continued to widen.
The financing data is not only the reflection of the real economy at the financial level, but also represents the expectations of the real economy sector for the economic outlook. The willingness of the enterprise sector to increase leverage is low, and the resident sector actively shrinks the balance sheet, which reflects the doubts of the real economy sector about the economic outlook to a certain extent. At the same time, according to the social finance data since 2017, the new financing of government departments accounts for only 21.2% of the new social finance, the resident sector accounts for 25.2% and the non-financial enterprise sector accounts for 53.6%. Therefore, if we want to stabilize the credit increment, the effectiveness of government departments is relatively small, and the key is to reverse the pessimistic expectations of residents and enterprise departments.
The expected reversal of residents and business sectors requires strong policies, and extraordinary policies are needed in extraordinary times. Since 2020, the covid-19 pneumonia epidemic has lasted for more than two years, which has had a significant impact on the production, operation and consumption expectations of residents and enterprise departments. The superposition of the regulatory policies in the real estate field since August 2020 has also increased the house purchase wait-and-see mood of residents to a certain extent. To a certain extent, it may take a long transmission time for conventional policies and measures to gradually restore the confidence of residents and enterprise departments from landing to effective. However, under the background of simultaneous slowdown of domestic and foreign demand, slowing down in some areas may mean the accumulation of financial risks to some extent. Therefore, at present, it is more necessary to adopt unconventional and effective policies to reverse the expectations of residents and enterprise departments as soon as possible and help residents and enterprise departments rebuild confidence.
Risk tips
The implementation of the policy was not as expected, and the local epidemic of covid-19 pneumonia spread widely.
