On August 9, the central bank issued the “China’s second quarter of 2021currencyThe Policy Implementation Report analyzes the current macro situation and looks forward to the next stage of monetary policy.
According to the report, on the whole, since the outbreak of the epidemic, my country has adhered to the implementation of normal monetary policy. In the first half of this year, the intensity of monetary policy has basically returned to the normal state before the epidemic, maintaining a leading position in global macro policies.
The report pointed out that in the next stage, the central bank will make overall plans for the convergence of macroeconomic policies this year and next, maintain the stability of monetary policy, enhance the forward-looking and effective nature, and not only strongly support the real economy, but also resolutely refrain from “overwhelming flooding” in an appropriate manner. The growth of the currency supports high-quality economic development, helps small and medium-sized enterprises and difficult industries continue to recover, and keeps the economy operating within a reasonable range.
ććThere is no basis for long-term inflation or deflation
The report analyzes the current macroeconomic situation in China. my country’s economy continues to resume growth and the development momentum is further strengthened. In the medium and long term, my country’s development is still in a period of important strategic opportunities, and the fundamentals of long-term economic improvement and high-quality development have not changed.
However, we must also be aware that the global epidemic is still evolving, the external environment has become more severe and complex, and the domestic economic recovery is still unstable and uneven.
From the external perspective, the spillover effects of ultra-loose monetary policies in major developed economies have become more prominent, and inflation has risen significantly. If their monetary policy shifts faster, it may cause global cross-border capital flows, increased exchange rate fluctuations, and significant adjustments in financial market valuations. .
On the domestic front, the foundation for economic recovery is not yet solid, export growth may slow down due to a high base, investment growth in some sectors is weak, and contact consumption such as catering and tourism has not been fully repaired. The sustainability of economic growth momentum faces certain challenges.
In addition, the price of bulk commodities has risen sharply, raising the cost of enterprises, and some small, medium and micro enterprises have greater difficulties.Bad assets, shadowBankThe pressure of rebound still needs attention, and the medium and long-term challenges such as the potential economic growth slowdown, the accelerating population aging, and the green transformation cannot be ignored.
In the second quarter,CPIModerate gains,PPIIt is rising in stages, and concerns about inflation have always existed. In this regard, the report pointed out that, on the one hand, this was a high reading from last year’s low base; on the other hand, the PPI itself has relatively large fluctuations, and it is not uncommon for the PPI to periodically drop or rush higher within a few months. Generally speaking, the high probability of my country’s PPI rise is phased, and may remain relatively high in the short term. As the base effect fades and global production and supply recovers, PPI is expected to tend to fall in the future.
“In the medium and long term, the decline in labor productivity growth and the aging of the population will curb inflation, and the explicit cost of carbon emissions will push up prices to a certain extent, hedge each other, and generally help stabilize prices. my country’s economic development is stable and improving last year. Since the epidemic, we have adhered to the implementation of normal monetary policies and domestic total supply and demand have basically been stable, which is conducive to the stability of price trends in the future, and there is no basis for long-term inflation or deflation.”
ććKeepreal estateContinuity of financial policy
The report explains the main ideas for the next stage of monetary policy. A prudent monetary policy must be flexible, precise, reasonable and appropriate, and stable, adhere to the implementation of normal monetary policy, do a good job in cross-cycle policy design, enhance macro policy autonomy, and grasp the strength and rhythm of the policy in accordance with the domestic economic situation and price trends, and deal with it. Improve the relationship between economic development and risk prevention, maintain overall economic stability, and enhance economic development resilience.
One is to keep the currencyCreditAnd the scale of social financing increased reasonably.Improve the money supply control mechanism and improve the central governmentBankadjustBankThe liquidity, capital andinterest rateConstraint long-term mechanism, manage the currency gate, maintaincurrency supplyAnd the growth rate of social financing scale basically matches the nominal economic growth rate, and the macro leverage ratio is basically stable.
Second, continue to implement and give full play to the leading role of structural monetary policy tools, and make good use of carbon emission reduction support tools to promote green and low-carbon development. Maintain the stability of re-lending and rediscount policies, implement the extension of two monetary policy tools that directly reach the real economy, continue to provide inclusive and continuous financial support to agriculture-related, small and micro enterprises, and private enterprises, and maintain support for small and micro enterprises. The financial support of enterprises remains unchanged, and their important role in stabilizing enterprises and ensuring employment should be better brought into play.
The third is to build an institutional mechanism for finance to effectively support the real economy. Promote the integrated development of inclusive finance, green finance, science and innovation finance, and supply chain finance as a whole, improve the financial support technology innovation system, and promote the realization of a virtuous cycle of finance, technology, and industry.
It is worth noting that the report pointed out that it is necessary to strictly control the credit scale of high-energy-consumption and high-emission projects, and promote the green transformation and upgrading of “two highs” projects.Firmly insist on the positioning that the house is used for living, not for speculation, and insist on not changingreal estateAs a means of stimulating the economy in the short-term, insist on stabilizing land prices and stabilizingHouse price, Stabilize expectations and maintainreal estateContinuity, consistency, and stability of financial policies, implement a prudent management system for real estate finance, and increase financial support for housing leasing.
The fourth is to deepeninterest rate, Market-oriented reform of exchange rate, smooth the transmission channel of monetary policy.
The fifth is to strengthen the construction of the basic system of the financial market, serve the real economy, and prevent market risks.
Sixth, we will further advance the reform of financial institutions, continuously improve corporate governance, and optimize financial supply.
Seventh, improve the financial risk prevention, early warning, handling, and accountability systems, and build a long-term mechanism to prevent and defuse financial risks.
ććTwo-way fluctuations become the norm
ććNo one can accurately predict exchange rate movements
At the end of June, the central parity of the RMB against the US dollar, the euro, the pound sterling, and the yen appreciated by 1.0%, 4.4%, 0.6%, and 8.2%, respectively, from the end of 2020. Since the reform of the RMB exchange rate formation mechanism in 2005 to the end of June 2021, the RMB has appreciated 28.1% against the U.S. dollar, 30.3% against the Euro, and 25% against the Japanese Yen. Direct RMB transactions in the inter-bank foreign exchange market are relatively active, with stable liquidity, which reduces the exchange costs of microeconomic entities and promotes bilateral trade and investment.
The report pointed out that since 2020, the two-way fluctuation of the RMB exchange rate also reflects the differences in domestic and foreign economic cycles and monetary policies.
In 2020, the new crown pneumonia epidemic will have an impact on the global economy. my country has intensified its macro policy response, and the prudent monetary policy has been flexible, appropriate and precise, providing strong support for my country to take the lead in controlling the epidemic, resuming work and production, and achieving positive economic growth. .
From May 2020, the monetary policy gradually turned to normal. At that time, the international epidemic accelerated and the major economies implemented ultra-loose monetary policies, and the renminbi appreciated against the US dollar and a basket of currencies.
Throughout 2020, the central parity of the RMB against the US dollar appreciated by 6.9%, which was less than the euro, and the CFETS index rose by 3.8%.
Since 2021, new crown pneumonia vaccination in advanced economies has made progress, and the market has seen re-inflation transactions.International financial markets begin to pay attentionMidlandThe Reserve Bank may reduce quantitative easing and raise interest rates ahead of schedule. In June, the U.S. dollar appreciated against major non-U.S. currencies, while my country insisted on implementing normal monetary policies, and the economy was operating near the potential growth rate. The RMB exchange rate against the U.S. dollar depreciated by 1.4% that month, and the CFETS index remained stable.
In general, the two-way fluctuation of the RMB exchange rate is the result of the combined effects of the domestic and foreign economic situation, the balance of payments situation and the changes in the foreign exchange market at home and abroad, which reasonably reflects the changes in the supply and demand of the foreign exchange market, and exerts an automatic stabilizer for adjusting the balance of payments and macroeconomics. It promotes internal and external balance and expands the space for my country to independently implement normal monetary policies.
In the future, two-way fluctuations in the RMB exchange rate will also be the norm. The RMB may appreciate or depreciate. No one can accurately predict the exchange rate trend. In the next step, we must continue to adhere to a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies for adjustment, rational use of monetary policy tools, strengthen macro-prudential management of cross-border financing, and rationally guide expectations through various methods to guide companies Establish a “risk-neutral” concept with financial institutions and maintain the basic stability of the RMB exchange rate at a reasonable and equilibrium level.
ććModerate growth of money supply and social financing
Data show that at the end of June, the balance of broad money supply (M2) was 231.8 trillion yuan, an increase of 8.6% year-on-year, maintaining strong support for the real economy. The stock of social financing was 301.56 trillion yuan, a year-on-year increase of 11%. In the first half of 2021, the cumulative increase in the scale of social financing was 17.74 trillion yuan, which was 3.13 trillion yuan less than the same period last year.
The report pointed out that the increase in the scale of social financing in the first half of the year mainly had the following characteristics: First, RMB loans increased more than the same period last year. Second, trust loans and undiscounted bank acceptance bills decreased significantly year-on-year. Third, corporate bonds increased slightly year-on-year, and domestic equity financing of non-financial companies was higher than the same period last year. Fourth, government bond financing has significantly decreased year-on-year. Fifth, the asset-backed securities financing of deposit financial institutions increased year-on-year.
According to the data, the money supply and the scale of social financing increased moderately in the first half of the year. However, since the outbreak of the epidemic in 2020, major developed economies have implemented a combination of extremely loose monetary policies and large-scale fiscal stimulus, and the government has led to promote monetary growth. In 2020,MidlandThe Reserve Bank purchased approximately 52% of the new Treasury bonds, and the money supply formed by supporting fiscal expenditures accounted for 61% of the new M2 in the United States. At the end of 2020, the currency growth of the United States, Europe, Japan and other countries deviated significantly from the nominal value.GDPGrowth rate.
From the perspective of price trends, the inflation situation in the United States is the most severe, and its monetary expansion deviates the most from the nominal GDP growth rate. In June, the US CPI reached a 13-year high of 5.4%, an increase of 4 percentage points from the end of the previous year. The European and Japanese CPIs of the month increased by 2.2 and 1.4 percentage points respectively from the end of the previous year.
Regarding the relationship between currency and inflation, the report column pointed out that the difference between the two quantitative easing policies after the 2008 crisis and the 2020 epidemic should be treated reasonably, and the relationship between currency and inflation should be correctly understood. After the epidemic, the central bank and fiscal coordinating with the quantitative easing policy to substantially increase the currency will promote a significant increase in global inflation in 2021.
The report pointed out that overall, the relationship between currency and inflation has not changed. A large amount of currency will inevitably lead to inflation. The key to stabilizing inflation is to control currency. The current inflationary pressure in my country is generally controllable. This is largely due to the fact that my countryās money supply growth rate has gradually returned to normal since May last year, leading other large economies. At the end of June this year, my countryās M2 growth rate was 8.6%, which is similar to that before the epidemic. Basically the same, basically matching the nominal economic growth rate, and stabilizing prices from a macro perspective.
In the next step, the monetary policy must adhere to the principle of stability, a prudent monetary policy that is flexible, precise, reasonable and appropriate, maintains the growth rate of the money supply and social financing scale to basically match the nominal economic growth rate, and adheres to the central bank and the fiscal “pocket bag” positioning , To fundamentally maintain the overall stability of the price level.
ććThe actual loan interest rate has stabilized and declined
Since the beginning of this year, the central bank has continued to deepen the reform of interest rate marketization, continued to unleash the potential of reforms to promote lower loan interest rates, optimize deposit interest rate supervision, and promote further reductions in actual loan interest rates.
The first is to promote the sound use of LPR pricing mechanisms by financial institutions and continue to release the potential of LPR reforms. Guide banks to embed LPR in internal fund transfer pricing (FTP), and strengthen the benchmark role of LPR in internal and external pricing of financial institutions.
The second is to optimize the supervision of deposit interest rates and keep the cost of bank liabilities basically stable. On June 21, 2021, the market interest rate pricing self-regulatory mechanism optimized the method for determining the self-regulatory upper limit of deposit interest rates. The original deposit benchmark interest rate multiplied by a certain multiple was changed to the deposit benchmark interest rate plus a certain basis point. This not only maintains the independent pricing power of bank deposit interest rates, but also facilitates orderly competition in the market, guides deposits back to a reasonable maturity structure, and stabilizes the cost of bank liabilities.
At present, all financial institutions have implemented the relevant requirements of the interest rate self-regulatory mechanism, and the implementation of the new deposit interest rate self-regulatory ceiling is in good condition, and the implementation is stable and orderly. In terms of listed interest rates, the listed interest rates of national bank deposits have remained basically unchanged, and the listed interest rates of medium and long-term deposits of some corporate financial institutions have been lowered.
In the first six months of 2021, the weighted average interest rate of loans was 5.07%, a decrease of 0.07 percentage points from the same period last year, and a decrease of 0.08 percentage points from the entire year of the previous year.
Among them, the interest rate of corporate loans fell even more. The weighted average interest rate of corporate loans in the first six months was 4.63%, a decrease of 0.16 percentage points from the same period of the previous year, and a decrease of 0.09 percentage points from the entire year of the previous year. The financing cost of the real economy was stable and declining.
According to the analysis of the report, my countryās economy is currently stable and improving, and the growth rate of money supply and social financing scale basically matches the nominal economic growth rate. A suitable interest rate environment was created.
(Source: Securities Times Net)
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