What substantive advances will the policy of stabilizing growth make?, The Central Bank and three other departments held a heavyweight meeting with the entity | Finance | Conference
On August 18th, the People's Bank of China, the State Administration for Financial Supervision and Administration, and the China Securities Regulatory Commission jointly held a video conference to study and implement the central government's decision-making arrangements, study and implement financial support for the development of the real economy, and prevent and resolve financial risks.
It is worth noting that this meeting emphasized that financial support for the real economy should be sufficient, the pace should be stable, the structure should be optimized, and prices should be sustainable.
Just a few days ago, the People's Bank of China released the "2023 Q2 China Monetary Policy Implementation Report", which just conveyed the "three stability" signals of stabilizing real estate, stabilizing commercial bank profits, and stabilizing exchange rates.
Based on comprehensive market analysis, this meeting has released a signal of further efforts in macroeconomic policy countercyclical regulation. After the continuous implementation of policy interest rate cuts, financial policies will strengthen their coordination with fiscal and industrial policies, forming a policy synergy in promoting consumption, stabilizing investment, and expanding domestic demand, promoting continuous improvement in social expectations, and strengthening the momentum of economic recovery. It is expected that with the comprehensive promotion of stable growth policies, key macro data such as consumption, investment, and industrial production growth rate in August are expected to improve.
A clearer direction for loose monetary policy
Monetary policy will further strengthen towards stable growth.
In the view of Wang Qing, Chief Macro Analyst of Dongfang Jincheng, the meeting prioritizes "sufficient efforts", indicating that the credit easing efforts will significantly increase in the future, and financial data will continue to lead economic data overall, accumulating strength for the strengthening of economic recovery momentum.
Affected by factors such as insufficient domestic demand and unstable expectations, the increase in credit and social financing in July was lower than market expectations, resulting in a relatively significant seasonal decline.
The meeting pointed out that China's economic recovery is a process of wave like development and tortuous progress. The financial sector should continue to implement the precise and powerful requirements of a prudent monetary policy, make good use of policy space, find the right direction for development, and continuously promote the continuous improvement of economic operation, the continuous enhancement of endogenous power, the continuous improvement of social expectations, and the continuous resolution of risks and hidden dangers.
From the statement made by the People's Bank of China in the "2023 Q2 China Monetary Policy Implementation Report", it can be seen that the attitude towards the next stage of monetary policy is also relatively positive. The statement "the total amount is moderate and the pace is stable" is deleted, emphasizing "better play to the dual functions of the total amount and structure of monetary policy tools" and "increase the intensity of macroeconomic policy regulation".
The Chief Economist of CITIC Securities clearly believes that this means that the central bank no longer emphasizes the constraints of monetary policy rhythm and opens up a broad monetary toolbox; In June and August, interest rates were continuously lowered, and under the pressure of fundamental conditions, the overall monetary easing intensity significantly increased. The demand for stable support for the recovery and development of the real economy is already urgent, and it is expected that the subsequent loose monetary policy will be more clear.
On August 15th, the three key policy interest rates "lowered" on the same day, and monetary policy released warmth. The mid-term lending convenience winning bid rate, 7-day reverse repurchase operation winning bid rate, and standing lending convenience rate for multiple varieties have been reduced by 15 basis points, 10 basis points, and 10 basis points respectively.
Looking ahead, Jia Dongxu, a macro analyst at Shenwan Hongyuan, believes that the reserve requirement reduction is still worth looking forward to, which is also an important way to stabilize the profits of commercial banks. It is expected that there will still be a 25BP reserve requirement reduction in the third quarter. Structural monetary policy tools will continue to strengthen, to some extent helping to stabilize the cost of bank liabilities.
Explore new credit growth points
The other three "requirements" proposed at the meeting are "stable pace", "optimal structure", and "sustainable prices", all closely related to the loan allocation of financial institutions.
Currently, the Chinese economy is facing the problem of insufficient total demand and weak recovery in the short term, and it urgently needs a package of policies to stabilize economic growth; In the medium to long term, it has entered a stage of high-quality development from high-speed growth, facing the challenge of industrial structure transformation.
Zhang Ming, Deputy Director of the Institute of Finance at the Chinese Academy of Social Sciences, believes that in this context, financial institutions should vigorously support the stable growth of the real economy in the short term through their investment and financing businesses, and even be prepared to make financial concessions to entities; In the medium to long term, its business layout should be integrated into the overall development of national key areas, contributing to supporting the construction of a modern industrial system and smoothly promoting the transformation of China's economic structure.
This meeting emphasized that major financial institutions should take the initiative to take action, increase loan disbursement efforts, and state-owned banks should continue to play a pillar role. We should pay attention to maintaining a stable pace of loan growth, appropriately guide and smooth out credit fluctuations, and enhance the stability of financial support for the real economy.
The meeting also proposed to pay attention to exploring new credit growth points, vigorously support key areas such as small and medium-sized enterprises, green development, technological innovation, and manufacturing, and actively promote the transformation of urban villages and the construction of public infrastructure for both emergency and emergency use.
Wang Qing believes that "optimizing the structure" refers to the future structural monetary policy being mainly focused on supporting weak links in the national economy such as small and medium-sized enterprises and the real estate industry, as well as key areas such as green development, technological innovation, and manufacturing; In terms of "sustainable prices", the current focus is to guide enterprises and residents to steadily reduce financing costs and stimulate the financing needs of market entities. After the MLF operating rate was lowered in August, it is expected that the LPR quotations for two varieties will also be lowered on the 21st. This will lead to a greater decrease in financing costs for enterprises and residents.
Wang Qing judged that after the central bank increased the rediscount quota for supporting agriculture and small businesses by 200 billion yuan on June 30th, there is a possibility of increasing the quota for other structural policy tools in the future, and it is also possible to create new policy tools.
Zhang Ming believes that although banks have lowered deposit interest rates since the beginning of this year to alleviate their asset liability pressure, in the macroeconomic context of insufficient total demand, the central bank still has room to lower interest rates, which in turn drives down loan interest rates to support the real economy. As the main provider of direct financing, it is highly likely that the net interest margin of banks will further narrow and their profits will be compressed. Banks should conduct risk assessment and contingency plan management in advance to cope with the pressure caused by this, and consider hedging by vigorously developing non interest income businesses.
The meeting also proposed to play an important role in the market-oriented adjustment mechanism of deposit interest rates, enhance the sustainability of financial support for the real economy, and effectively play the positive role of finance in promoting consumption, stabilizing investment, and expanding domestic demand. Wang Yifeng believes that the downward trend in loan prices further strengthens the necessity of debt management. Major banks may further lower their deposit listing rates and simultaneously lower their internal interest rate authorization limits in the near future, with a greater magnitude than the previous round.
It is necessary to further strengthen the support policies in the real estate sector
In terms of the real estate market, the meeting reiterated the need to "adjust and optimize real estate credit policies", and at the same time proposed to continue to promote the stable and moderate reduction of financing costs in the real economy, standardize the pricing order of loan interest rates, and comprehensively consider the price relationship between increment, stock, and other financial products.
This statement also continues the tone of the Central Political Bureau meeting. Compared to the monetary policy execution report in the first quarter, the second quarter report not only pointed out the need to adapt to the new situation of significant changes in the supply and demand relationship in the real estate market and adjust and optimize real estate policies in a timely manner, but also emphasized the need to promote stable and reduced financing costs for enterprises and residents.
Wang Qing's analysis suggests that this may mean that interest rate cuts will continue, especially in the current context where the interest rates on newly issued housing loans are significantly lower than those on existing housing loans. Lowering the interest rates on existing housing loans for residents will be the most direct way to stabilize the cost of credit for residents. Secondly, reducing the down payment ratio is also an important means to better meet the demand for rigid and improved housing. In addition, policies such as purchase and sales restrictions introduced during the overheated stage of real estate demand may also be adjusted in the current changes in the supply and demand relationship of real estate.
In addition, Wang Qing believes that "considering the price relationship between increment, stock, and other financial products comprehensively" mainly refers to the fact that the current interest rate difference between new and old mortgage loans is relatively large. Next, a reduction in the interest rate of existing mortgage loans will be initiated to curb the "early repayment trend" and stabilize the order of the mortgage market. For the reduction rate, he believes that referring to the 2008 reduction ratio and the current spread between new and old mortgage rates, it will be around 0.5 to 1 percentage point. For the losses incurred by banks in terms of interest, they can be partially compensated by guiding them to moderately reduce deposit interest rates, and now they also have such conditions.
Looking ahead to the future, Wang Yifeng, Chief Analyst of the Financial Industry at Everbright Securities, believes that there is a strong need for specific supportive policies in the real estate sector to focus on three aspects: first, optimizing demand side financing policies for real estate, stimulating changes in existing housing credit policies, including purchasing policies in first tier cities, and lowering interest rates on existing mortgage loans, in order to promote increased mortgage investment and reduce early repayment; The second is targeted support in the field of guaranteed delivery buildings. In order to ensure the safe completion of the guaranteed delivery of the building in the future, policy tools such as special loans will still be needed to be strengthened; The third is the transformation of urban villages, which may form a sustained focus of credit investment, limited in the short term but predictable in the long term. Possible supportive policies that may be introduced in the future include but are not limited to establishing special loans, including them in the scope of special bond use, enjoying tax incentives, and expanding the implementation of urban areas.
