The People’s Bank of China recently released a report on the implementation of China‘s monetary policy in the second quarter of 2022, showing that the weighted average interest rate of loans and the weighted average interest rate of corporate loans in June were 4.41% and 4.16%, respectively, which are new lows since statistics.
The effectiveness of the LPR reform is highlighted, and the competitiveness of the credit market is enhanced
The financial management department has created a favorable monetary and financial environment to support the real economy and reduce corporate financing costs.
Driven by the steady decline of corporate loan interest rates, corporate financing costs have dropped significantly.
Since the beginning of this year, the People’s Bank of China has guided the interest rate self-discipline mechanism to optimize the formation of the deposit interest rate self-discipline cap, and at the same time urged the orderly reduction of illegal deposits. State-owned banks and most joint-stock banks have lowered the interest rates on time deposits with a maturity of more than one year and large-denomination certificates of deposit in April, and some local corporate institutions have also lowered their interest rates accordingly.
Chief Economist of CITIC Securities: “Reducing the financing cost of the real economy is one of the priorities of my country’s economic work. Structural monetary policy tools play a significant role, such as various special re-lending, carbon emission reduction support tools, etc., which help direct liquidity. Entities, support financing in key areas and weak links. Improve the market-oriented interest rate formation and transmission mechanism, and give full play to the efficiency of the loan market quotation interest rate reform, which will also help reduce the comprehensive financing cost of enterprises.”
Lending rates still have room to fall
The realization process of “easy credit” is relatively slow, the contradiction between credit supply and demand still exists, and there is still room for downside in corporate loan interest rates.
Judging from the marketization of deposit interest rates and the recent high willingness of residents to save, the cost of banks’ acquisition of deposits has declined.
From the perspective of bank interest margins, as loans are an important asset of banks, falling interest rates will inevitably put pressure on interest margin management. However, considering the cost control on the bank’s liability side, the pressure on banks’ interest margins is generally limited and controllable.
Promote the reduction of comprehensive financing costs for enterprises
The People’s Bank of China has made it clear that it is necessary to promote the reduction of comprehensive financing costs for enterprises.
Macro policy: On the one hand, financial institutions should be encouraged to give more credit resources to key areas and weak links, which can be precisely supported and effectively guided by structural monetary policy tools.
Financial institutions: It is necessary to reduce the actual loan interest rate by reducing the cost of bank liabilities and deepening the reform of interest rate liberalization.
Wen Bin said: “The development of various structural re-lending tools and development and policy financial tools will become an important support for credit in the second half of the year.”
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