Central Bank and State Administration of Foreign Exchange take action, big news! From now on, we will implement macro | cross-border | central bank
The official website of the People's Bank of China announced today that in order to further improve the macro prudential management of cross-border financing across all channels, continue to increase the sources of cross-border funds for enterprises and financial institutions, and guide them to optimize their asset liability structure, the People's Bank of China and the State Administration of Foreign Exchange have decided to increase the macro prudential adjustment parameters for cross-border financing for enterprises and financial institutions from 1.25 to 1.5, which will be implemented on July 20, 2023.
Wen Bin, Chief Researcher of China Minsheng Bank, stated that the so-called "macro prudential adjustment parameter for cross-border financing" is a calculation factor in the "upper limit of risk weighted balance for cross-border financing". Increasing this parameter can increase the corresponding upper limit of risk balance, facilitate domestic enterprises and financial institutions to increase cross-border financing quotas, facilitate cross-border capital inflows, and optimize asset liability structure. At the same time, with the increase of domestic foreign exchange funds, the corresponding demand for foreign exchange settlement increases, which can also have a stabilizing effect on the exchange rate.
From a historical perspective, according to publicly available information from the People's Bank of China, in 2016, the People's Bank of China and the State Administration of Foreign Exchange established a macro prudential management framework for cross-border financing across all channels, cancelled pre approval for external debt, and facilitated cross-border financing for domestic institutions. At first, the management framework was piloted on a small scale, and then expanded to financial institutions and enterprises nationwide, with a macro prudential adjustment parameter of 1. Since then, the macro prudential adjustment parameters have been adjusted many times. In March 2020, in order to strengthen financial support for the prevention and control of the COVID-19 and economic and social development, further expand the use of foreign capital, and reduce the financing costs of the real economy, the People's Bank of China and the State Administration of Foreign Exchange raised the macro prudential adjustment parameters of full caliber cross-border financing from 1 to 1.25; In December 2020, the People's Bank of China and the State Administration of Foreign Exchange adjusted the macro prudential adjustment parameters for cross-border financing of financial institutions from 1.25 to 1; In January 2021, the People's Bank of China and the State Administration of Foreign Exchange first raised the macro prudential adjustment parameters for overseas loans of domestic enterprises from 0.3 to 0.5. Shortly thereafter, they issued a notice on adjusting the macro prudential adjustment parameters for cross-border financing of enterprises, deciding to lower the macro prudential adjustment parameters for cross-border financing of enterprises from 1.25 to 1.
On October 25, 2022, in order to further improve the macro prudential management of cross-border financing across all channels, increase the sources of cross-border funds for enterprises and financial institutions, and guide them to optimize their asset liability structure, the People's Bank of China and the State Administration of Foreign Exchange decided to increase the macro prudential adjustment parameters of cross-border financing for enterprises and financial institutions from 1 to 1.25.
Wen Bin said that in the future, the regulatory "exchange rate toolbox" will still be relatively sufficient, mainly including tools such as foreign exchange deposit reserve ratio, forward foreign exchange risk reserve ratio, cross-border financing leverage ratio, and macro prudential adjustment coefficient for domestic and foreign enterprise loans. It can continue to guide market expectations reasonably and effectively when necessary.
After the release of the above policies, the exchange rate of the Chinese yuan against the US dollar has risen significantly. The onshore and offshore RMB/USD exchange rate has returned above the 7.20 mark. The offshore RMB/USD has continuously recovered from the 7.21, 7.20, 7.19, and 7.18 levels, reaching a maximum of 7.1795. The intraday increase has expanded to over 500 points. The onshore Chinese yuan rose above the 7.18 mark against the US dollar, up more than 400 points from the closing of the previous day and night trading.
The medication and follow-up examination after myopia surgery are directly related to the recovery effect of the surgery. Experts such as Zhang Fengju have stated that postoperative medication must strictly follow the doctor's advice and not blindly increase or decrease the dosage. The time for re examination is generally one day, one week, one month, three months, six months, and one year after the surgery, and routine re examination at the hospital is required at these time points. After surgery, if there is eye trauma, sharp decline in vision, eye pain, elevated intraocular pressure, etc., timely medical attention should also be sought.
Two departments amplify the call! After 9 months, this tool has been launched again! The RMB has risen in response! How significant is the impact?
In order to further improve the macro prudential management of cross-border financing across all channels, continue to increase the sources of cross-border funds for enterprises and financial institutions, and guide them to optimize their asset liability structure, the People's Bank of China and the State Administration of Foreign Exchange have decided to increase the macro prudential adjustment parameters for cross-border financing for enterprises and financial institutions from 1.25 to 1.5, which will be implemented on July 20, 2023.
This is the second time since October 2022 that the People's Bank of China and the State Administration of Foreign Exchange have adjusted cross-border macro prudential adjustment parameters. Market analysis suggests that the upward adjustment of macro prudential adjustment parameters for cross-border financing aims to unleash more external debt financing potential for domestic enterprises and financial institutions, encourage external debt financing, and help balance international payments. The parameter adjustment this time is due to the recent increase in pressure on the depreciation of the Chinese yuan compared to the trend of the US dollar. The regulatory authorities have used stable exchange rate policy tools to guide market expectations and avoid large fluctuations of the Chinese yuan exchange rate outside of a reasonable equilibrium range. As of the reporter's press release, the offshore Chinese yuan has risen above the 7.2 level against the US dollar, with a daily increase of over 300 points. Using this tool to stabilize exchange rates
Macro prudential adjustment parameters for cross-border financing are considered as one of the policy tools for stabilizing exchange rates. Pang Ming, Chief Economist and Research Director of JLL Greater China, told First Financial that in the context of China's moderate external debt scale, reasonable structure, and overall controllable risk, this measure also helps to maintain a reasonable and orderly two-way balanced flow of cross-border funds, maintain stable foreign exchange reserve size and market expectations, maintain stable and healthy operation of the foreign exchange market, maintain basic stability and two-way fluctuations of the RMB exchange rate at a reasonable and balanced level, and promote internal and external balance.
Wen Bin, Chief Economist of Minsheng Bank, stated that historically, regulatory authorities have lowered the macro prudential adjustment parameters for cross-border financing of financial institutions and enterprises from 1.25 to 1 since December 2020 and January 2021, respectively, when the RMB exchange rate was in the appreciation range. In October 2022, the regulatory authorities adjusted the macro prudential adjustment parameters for cross-border financing of financial institutions and enterprises from 1 to 1.25, when the RMB exchange rate was in the depreciation range. The current exchange rate of the Chinese yuan against the US dollar is around 7.2, and this adjustment reflects the regulatory authorities' intention to reasonably guide market exchange rate expectations. Recently, the fluctuation of the RMB exchange rate has increased. In the past few years, the exchange rate of the Chinese yuan against the US dollar has broken through "7" three times and returned to below "7" three times. Recently, the Chinese yuan has once again "broken 7" against the US dollar, marking the fourth time since 2019. Regarding the upcoming trend of the RMB exchange rate, Vice Governor of the People's Bank of China, Liu Guoqiang, recently stated that in recent years, the People's Bank of China has accumulated rich experience in dealing with multiple rounds of external shocks and has sufficient reserves of policy tools. Neither lacks composure nor is it too Buddhist. In terms of stabilizing expectations policies, several major domestic banks lowered their US dollar deposit interest rates in early July. It is widely believed in the industry that banks, taking into account their own business strategies, changes in market supply and demand, and other factors, can make proactive adjustments. On the one hand, this can alleviate the problem of inverted domestic US dollar deposit and loan interest rates, and on the other hand, it can also help stabilize the RMB exchange rate. Wang Qing, Chief Macro Analyst at Dongfang Jincheng, believes that the current policy toolbox for stabilizing the foreign exchange market is rich. If the pressure of RMB depreciation continues to ferment in the future, regulatory authorities can also use policy tools such as lowering the macro prudential adjustment coefficient for domestic enterprises' overseas loans, lowering the foreign exchange reserve ratio, increasing the foreign exchange risk reserve ratio, reintroducing the anti cyclical control factor for the RMB central parity rate, and even increasing the issuance of central bank bills in the offshore market to implement regulation. The possibility of the RMB exchange rate falling below the low point of November last year in the short term is unlikely. Beneficial for cross-border capital inflows
The so-called "macro prudential adjustment parameter for cross-border financing" is a calculation factor in the "upper limit of risk weighted balance for cross-border financing". Increasing this parameter can increase the corresponding upper limit of risk balance, facilitate domestic enterprises and financial institutions to increase cross-border financing quotas, facilitate cross-border capital inflows, and optimize asset liability structure. This policy belongs to one of the macro prudential management measures for cross-border capital flows.
According to relevant policy regulations, the upper limit of cross-border financing risk weighted balance=capital or net assets * cross-border financing leverage ratio * macroeconomic prudential adjustment parameters. According to industry insiders, the current cross-border financing leverage ratio is 2 for enterprises; 1 for non bank financial institutions; Most banks have a ratio of 0.8. The macro prudential adjustment parameter has been raised from 1.25 to 1.5, which means that under the financing model of "full caliber external debt", the external debt quota of domestic enterprises and financial institutions has increased by 25%.
Pang Ming stated that raising the macro prudential adjustment parameters for cross-border financing of enterprises and financial institutions is conducive to further expanding the utilization of foreign investment and expanding financing channels, facilitating cross-border financing for domestic enterprises and institutions, reducing the difficulty and cost of financing for the real economy, serving the development of the real economy, better coordinating the domestic and international situation, effectively utilizing the two markets and resources, and coordinating the domestic and international cycles. In his view, raising the macro prudential adjustment parameters for cross-border financing means correspondingly relaxing the upper limit of overseas financing quotas. Structurally speaking, this is more convenient for small and medium-sized enterprises and private enterprises with lower net assets in domestic enterprises and institutions, and more advantageous for issuing entities with medium to high qualifications and high-quality enterprises. Last October, the People's Bank of China and the State Administration of Foreign Exchange announced a decision to increase the macro prudential adjustment parameters for cross-border financing of enterprises and financial institutions from 1 to 1.25.
