The RRR cut across the board is unusual this time! In depth good article .

After cutting interest rates and RRR in August and September 2023, the People's Bank of China (PBOC) has opened its policy toolbox.

On January 24, Pan Gongsheng, governor of the central bank, announced the relevant policies of the RRR cut at a press conference

The reserve requirement ratio of financial institutions will be lowered by 05 percentage points, providing long-term liquidity to the market of 1 trillion yuan;

And from January 25, the re-lending rates for supporting agriculture, re-lending for small enterprises, and re-discounting will be lowered by 0 each25 percentage points.

Although there are still a few days before the RRR cut is implemented, the market is boiling first.

As soon as the news came out, more funds flowed to other channels - the yield of 10-year treasury bonds fell in response, and the Hang Seng Index and the Shenzhen and Shanghai Indices both had varying degrees**.

However, it should be mentioned that in the past two years, the central bank has cut the reserve requirement ratio four times across the board, and the range has been controlled at 25 basis points, that is, the reserve requirement ratio has been reduced by 025 percentage points. Looking back, the 50 basis point reduction is already the policy strength in 2021. Therefore,This time 05 percentage points downThe amplitude is larger, exceeding market expectations

And since the beginning of 2024, the MLF (medium-term lending facility) interest rate will remain at 25% unchanged, and LPR (Loan Market Rate)** is also unchanged. Combined with the past situation, the news of the RRR cut should also be announced in late 2023 or early January.

Under such circumstances, how should we understand the unusual RRR cut at the end of January?

1 trillion, an unexpected "timely rain".

The market had expectations for the news of the RRR cut - the market needed and expected the policy.

Qu Hongbin, vice chairman of the China Chief Economist Forum and former chief economist of HSBC, told Yan Finance: "Although the GDP growth target of 5% for the whole year of 2023 has been successfully achieved, the trend of weakening market expectations has not been reversed, and one of the main reasons is thatTotalThe problem of insufficient demand remains prominent

This is supported by full-year 2023 data released by the National Bureau of Statistics on January 12.

According to the data, the national household consumption index (CPI) in 2023 will be 02%, core CPI year-on-year **07%。The CPI in December 2023 decreased by 03%, a decrease of 02 percentage points.

As Li Chao, spokesman of the National Development and Reform Commission, saidThe CPI in 2023 is generally running at a low level

At the same time, the data shows that due to factors such as the decline in international oil prices and the lack of demand for some industrial products, the national industrial producers' ex-factory ** index (PPI) will decline by 3% year-on-year in 2023; In December 2023, the PPI fell by 27%, a decrease of 0 from the previous month3 percentage points.

While the recovery of effective domestic demand is still insufficient, external demand has not yet fully recovered due to the impact of the international situation.

Although the scale of imports and exports in 2023 will rise quarter by quarter, and it has withstood the pressure to promote stability and quality, showing strong economic resilience, the total import and export value of the year increased by 0.0 year-on-yearThe 2% figure shows that there is still room for development.

The lack of market demand is transmitted to the manufacturing industry - according to the National Bureau of Statistics, China's manufacturing purchasing managers' index (PMI) in the fourth quarter of 2023 was 49%, which is a weak trend.

Economic pressures remain, and difficulties remain. Therefore, in Qu Hongbin's view, "the top priority is to increase the countercyclical adjustment of fiscal and credit policies and stop the downward trend of expectations and demand as soon as possible."

After all, with the gradual slowdown in economic growth and the volatility of global financial markets, companies are facing financing problems, and consumers are willing to save, both of which need to be further unleashed and their expectations need to be further adjusted.

Talking about the strength of the RRR cut, Zhu Keli, executive director of the China Information Association and founding director of the National Research Institute of New Economy, believes that the 50 basis point adjustment is still expected, "because the central bank has been keeping liquidity reasonable and abundant through monetary policy tools."

But".The choice of timing took the market by surpriseIn the past three years, the timing of RRR cuts has often coincided with specific economic cycles or policy needs", Zhu Keli mentioned to Yan Financial Reporter.

In the past three years, the RRR cut at the beginning of the year was announced in July 2021, April 2022, and March 2023. The year-end message was sent out in November and December, and was implemented in that year.

As a result, after the PBOC maintained the MLF excess renewal on January 15, 2024, the market's expectations for a RRR cut in the first month of 2024 have also declined.

In this regard, Zhu Keli analyzed: "(The choice of the timing of the RRR cut) reflects the central bank's new judgment on the current economic situation and the new consideration of the future policy direction......Perhaps it is also one of the effects that the central bank hopes to achieve, namelyGuide market expectations by breaking the mold

If the market wants to act, the market needs more space.

From the perspective of changes in the external environment, the space for China's monetary policy adjustment will be expanded - the Fed has paused interest rate hikes three times in a row at the end of 2023, and the expectations of the Fed and the European Central Bank to cut interest rates in 2024 have strengthened.

At the press conference of the RRR cut, Pan Gongsheng, governor of the central bank, also said in response to reporters' questions that the monetary policy cycle gap between China and the United States is converging, which is objectively conducive to strengthening the autonomy of China's monetary policy operation.

In any case, the RRR cut is coming.

What does it mean?

However, what does it mean that major financial institutions pay less money to the central bank?

The most direct impact isIn the short term, increase the amount of money in the broad sense and increase market liquidity

Reserve requirements are mainly used to prevent bank runs, which also affects the scale of credit expansion of banks and other financial institutions.

According to the adjusted reserve requirement ratio, in the ideal model, when the bank receives a deposit of 100 yuan from depositor A, A can only lend a maximum of 93 yuan to B, which is transferred from depositor A's account to account B, becoming B's bank "deposit", but at this time, the bank can only lend up to 86$49 for C.

Funds are gradually converging in this process, and the central bank has indirectly controlled the amount of money in a broad sense in this way, and the reserve requirement ratio has become an important monetary policy tool.

In other words, if the reserve requirement ratio is lowered, after each transaction, banks and other financial institutions will be able to invest more money in the next transaction, and the amount of money will increase, and the bank interest rate will face downward pressure.

At the very least, a large amount of liquidity can alleviate the pressure on banks' debt. WhileWhen banks are able to provide more long-term funds with lower interest rates to the real economyThe reduction in financing costs will boost corporate earnings expectations and confidence, thereby leading to the expansion of production and the increase of social investment

Of course, when interest rates fall, ideally the total amount of deposits in banks will also decrease, either in the form of consumption or speculative investment, and become part of the activation of market cells. From this point of view, the RRR cut will also lead to an increase in aggregate demand.

Whether it is production or demand, the end of the chain is also the gradual restoration of market expectations and investor confidence. After this step, we can also expect more market vitality and more economic growth.

In response to the RRR cut, in addition to increasing liquidity and promoting the impact of production and consumption, Zhu Keli also commented: "From the perspective of short-term impact, (the RRR cut will also)."It will help to enhance investor confidence, stabilize financial markets such as ** and bond markets, and promote the healthy development of financial markets. ”

Judging from the real-time fluctuations in the interest rate of 10-year treasury bonds, the Shenzhen and Shanghai indexes and the Shanghai Composite Index, the steady growth signal released by the central bank has been received, and short-term market confidence has been boosted.

From the perspective of medium-term impact, the RRR cut will be beneficial to promoting the development of the real economy and economic restructuring. By reducing the financing cost of the real economy, we can promote enterprise technological innovation and industrial upgrading, improve the quality and efficiency of economic growth, and promote the optimal allocation of resources and economic restructuring. Zhu Keli told Salt Finance.

It should be mentioned that the policy of comprehensive RRR cut and targeted interest rate cut is not isolated, and it will also be combined with the batch landing of 1 trillion national bonds and the gradual relaxation of real estate policies.

Various policies work together to look forward to individuals, enterprises and even the country being able to start a young game in 2024 and give everyone a good development expectation.

But monetary policy is not a panacea, Jukeli cautioned at the same timeThe RRR cut can only alleviate the downward pressure on the economy to a certain extent, but cannot solve the fundamental problem. In order to achieve long-term stable economic growth, it is necessary to strengthen supply-side structural reform and promote innovation-driven development and other comprehensive measures to continue to advance. ”

After all, the RRR cut will only inject a lot of liquidity into the market in the short term, giving all walks of life more time and space for "operation".

And over-reliance on monetary policy will also bring risks to economic development, and whether and how to use more policy tools in the future needs to pay close attention to changes in economic development.