Matters:
The Information Office of the State Council held a press conference at 3 p.m. on January 18, 2022 to invite Liu Guoqiang, vice president of the people's Bank of China, to introduce the financial statistics of 2021 and answer reporters' questions.
Ping An View:
Steady growth is the main tone of monetary policy in 2022. Previously, the central bank has stressed that the observation of monetary policy attitude should not be based on quantitative operation, but on price signals. On Monday, both MLF and Omo interest rates fell, marking the shift to loose monetary policy. On Tuesday, the State Council Information Office's central bank press conference continued to release easing signals, such as "opening the monetary policy toolbox wider, maintaining total stability and avoiding credit collapse", "being more proactive, enterprising and focusing on moving forward", "At present, the average deposit reserve ratio of financial institutions is not high, and the space for further adjustment is smaller, but there is still some space.". We expect that after the interest rate cut, the total instruments of short-term monetary policy will be in the observation period, and the power of the policy may be more dependent on structural monetary policy instruments. There is still room for total monetary easing. The next easing window will depend on the economic repair effect, especially whether the real estate market can stabilize. The two sessions and the meeting of the Political Bureau of the CPC Central Committee in April are the observation windows.
What is the current economic situation? The economic data in December showed that under the policy of ensuring supply and stabilizing price, the industrial production constraints eased and warmed up; On the demand side, domestic demand is weak as a whole, and policies still need to be overweight. Among them, real estate related data and residents' consumption are a significant drag. Infrastructure investment has rebounded under the post fiscal force, indicating that the effect of counter cyclical policies is beginning to show. Looking back, we are not pessimistic about the recovery of infrastructure investment. The key to steady growth lies in the stabilization of the real estate market. Historically, when financial conditions are relaxed, there will be a rebound in real estate sales, driving enterprises to take land and new construction, and then real estate investment will rebound. However, under the constraints of "no speculation in housing and housing" and "three red lines", the expansion power of real estate developers is limited, especially with the maturity of a large number of debts, which will restrict the enthusiasm of developers to obtain land and start new construction, which is also the biggest uncertainty of this round of steady growth.
Will there be flood irrigation? No, first, the press conference said that "it is expected that the macro leverage ratio will remain basically stable in 2022". On a quarterly basis, China's leverage ratio has declined for five consecutive quarters. In 2022, the leverage ratio emphasizes stable rather than moderate expansion, and the stimulus is weaker than that after the epidemic in 2020; Second, the lack of real estate as a credit carrier, it is difficult to have a wide range of credit and "flood irrigation". The press conference said that "one of the core characteristics of real estate is regionality. Under the management framework of long-term mechanism of real estate, it is more to implement the territorial responsibility of urban government and implement real estate regulation and control according to urban policies in combination with local market situation". This shows that there will be no overall relaxation in real estate regulation. In fact, this is also the main concern that the market has been worried about the difficulty of significantly improving the credit environment.
What is the impact on the RMB exchange rate? Recently, the tightening expectation of the Federal Reserve has heated up rapidly. In this regard, the central bank reiterated that it will "focus on me" and stressed that "give play to the function of exchange rate regulation, macroeconomic and automatic balance of payments stabilizer". Our understanding is that under the "ternary paradox", the previous monetary easing of the central bank will be restricted by the fear of RMB exchange rate depreciation to a certain extent.
