On April 6, Premier Li Keqiang presided over an executive meeting of the State Council, deploying the timely use of monetary policy tools to more effectively support the development of the real economy.
The meeting pointed out that it is necessary to flexibly use various monetary policy tools such as re-lending in a timely manner, better play the dual functions of total volume and structure, and increase support for the real economy. Among them, it is mentioned that the increase of re-loans to support agriculture and small-scale enterprises, the government special bonds to supplement the capital of small and medium-sized banks, the improvement of financial services for new citizens, the establishment of two special re-loans for technological innovation and inclusive elderly care, etc.
Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, told the “Daily Economic News” reporter that from the content of the meeting, the domestic monetary policy was more active and promising, and the support for the real economy was increased. The advantages of direct and direct policy tools, etc., improve the precise quality and efficiency of policy support for the real economy.
“In addition, the re-lending to support agriculture and small businesses mentioned in the meeting, government special bonds to supplement the capital of small and medium-sized banks, etc., are mainly through these structural tools to guide financial institutions to optimize the credit structure while ensuring the steady growth of the monetary aggregate. Increase support for the weak links and key areas of the real economy, solve the financing problems in the weak links of the real economy, stabilize development confidence, stimulate the vitality of micro entities, stabilize employment, and accelerate the recovery of domestic demand.” Zhou Maohua said.
Give full play to the dual functions of the total amount and structure of monetary policy tools
The executive meeting of the State Council pointed out that it is necessary to flexibly use various monetary policy tools such as re-lending in a timely manner, better play the dual functions of total volume and structure, and increase support for the real economy. Specifically, the first is to increase the implementation of a prudent monetary policy and maintain a reasonable and sufficient liquidity. Increase re-loans to support agriculture and small businesses, make good use of inclusive small and micro loan support tools, use market-oriented and legalized methods to promote financial institutions to reasonably transfer profits to the real economy, and promote small, medium and micro enterprises to increase financing, expand coverage, and reduce prices.
The second is to study and adopt measures to financially support consumption and effective investment, improve the level of financial services for new citizens, optimize financial services for affordable housing, ensure the financing needs of key project construction, and promote the rapid growth of medium and long-term loans to the manufacturing industry.
The third is to support financing in key areas and weak links, and set up two special re-loans for technological innovation and inclusive pensions. The People’s Bank of China provides 60% and 100% of the loan principal respectively. Do a good job in supplementing the capital of small and medium-sized banks with special government bonds, and enhance the credit capacity of banks.
Zhou Maohua said that the meeting conveyed at least three aspects of information. First, the monetary policy is more active and promising, guiding financial institutions to further benefit the real economy, and increasing support for weak links and key areas of the real economy;
Second, the monetary policy maintains a stable tone, and the aggregate amount and structural tools are organically coordinated. In the case of a moderate increase in the aggregate amount of money, the credit structure will be optimized, and the precise quality and efficiency of the policy will be improved. The meeting mentioned technological innovation and special re-lending for inclusive elderly care, etc. are very new structural tools;
The third is that the policy exerts force on both sides of supply and demand. On the one hand, it reduces the financial pressure and financing difficulties of market entities, especially small and micro enterprises, individuals and other enterprises, and stabilizes the development confidence; on the other hand, inclusive finance also helps to release potential market demand.
Expert: The pressure on bank liabilities can be eased through targeted RRR cuts
The meeting pointed out that my country’s current economic operation has generally remained within a reasonable range, but the complexity and uncertainty of the domestic and foreign environments have intensified, and some have exceeded expectations. The recovery of the world economy has slowed down, the global commodity markets such as grain and energy have fluctuated sharply, and domestic epidemics have occurred frequently recently. The difficulties of market players have increased significantly, the smooth economic cycle has encountered some constraints, and the new downward pressure has further increased. It is necessary to strengthen confidence, but also We must attach great importance to and be alert to new problems and new challenges. It is necessary to implement the decisions and arrangements of the Party Central Committee and the State Council, coordinate epidemic prevention and control and economic and social development, and promptly implement the spirit of the Central Economic Work Conference and the measures of the “Government Work Report”, some of which can be implemented in advance. Put stable growth in a more prominent position, make overall plans to stabilize growth, adjust the structure, and push forward reforms, so as to effectively stabilize the macroeconomic market. To keep the economy operating in a reasonable range, mainly to achieve basic stability of employment and prices, we must focus on ensuring employment by stabilizing market players, and comprehensively implement policies to ensure smooth logistics, stable industrial and supply chains, and food and energy security. All departments should focus on the overall situation and take the initiative to act. While supervising the implementation of the established policies, they should promptly study policy plans in response to changes in the situation, and promptly introduce measures that are conducive to stabilizing market expectations. All regions should also take practical and effective measures such as rent reduction or exemption in light of their actual conditions.
Zhou Maohua said that since the beginning of the year, my country’s economic development environment has become more complex, and the domestic epidemic, international geopolitical situation, overseas economic recovery and uncertainty about policy prospects have intensified the downward pressure on the domestic economy; Hedging short-term economic downward pressure; how to balance the short-term stability of the economic market, effectively prevent potential risks, and at the same time promote sustainable economic development, test wisdom.
Zhou Maohua said that using market-oriented and legalized methods to guide financial institutions to support the weak links and key areas of the real economy, for example: domestic RRR cuts, targeted RRR cuts, re-lending and re-discounting and other tools can be used to expand financing channels for small and medium-sized banks, effectively Ease the pressure on banks’ liabilities, reduce the cost of liabilities, etc., give full play to the orientation and direct characteristics of structural tools, and guide financial institutions to further benefit the real economy; at the same time, it can also cut interest rates, promote financial institutions to tap the potential of interest rate reform, and effectively reduce the overall financing cost of the real economy.
Cover image source: Visual China