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Central Bank cuts 0.5 percentage point

The first reduction in 2020 will release more than 800 billion long-term funds

On January 1, 2020, the central bank released news that in order to support the development of the real economy and reduce the actual cost of social financing, the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on January 6, 2020. The central bank stated that the RRR cut is a comprehensive RRR cut, which reflects counter-cyclical adjustments and released about 800 billion yuan of long-term funds, effectively increasing the stable funding sources for financial institutions to support the real economy.
Ministry of Finance of China Economic Net
Headlines
The first reduction in 2020 will help the real economy hedge companies' funding gap in January
This time, the central bank's choice to announce a comprehensive RRR cut on the first day of 2020, what kind of positive impact can it have on the operation of physical enterprises at this stage? In this regard, Lu political commissar, chief economist of Industrial Bank, said that January is a big month to pay taxes, and new special bonds may also be issued in January, resulting in a large liquidity gap in January. Announcing the RRR cut will fill the liquidity gap in January. Huatai Futures Research Institute's macro group has released a research report analysis, saying that January is the largest corporate income tax month in a year, which puts some pressure on liquidity. Generally, corporate income taxes are paid in the first month of the next quarter, and January is the month in which the enterprise pays income taxes in the fourth quarter.
CICC: The RRR cut before the Spring Festival is in line with expectations that there is still room for a reduction in 2020
CICC said that the market already has certain expectations for the recent reduction in standards. Before the Spring Festival holiday, it will usually face a liquidity gap of more than 1 trillion yuan (as compared to the Spring Festival earlier this year), and large-scale local bond issuance will start on January 2nd, and the issuance arrangement may still follow the "front high and back low" in 2019 In the early 2020s, the banking system is facing greater liquidity pressure, and the central bank needs to conduct liquidity hedging.
Central bank cuts: housing companies ease funding pressures
Zhang Dawei, chief analyst of Zhongyuan Real Estate, stated that under the clear requirements of "no housing and speculation" and "no use of real estate as a means to stimulate the economy in the short term", real estate regulation and control policies still constrain housing enterprises to increase leverage. "It is a good thing for large-scale housing companies to reduce their allowances, but it has basically no effect on small and medium-sized enterprises with narrow financing channels. It is expected that the follow-up market will continue to eat big fish."
Central Bank announces cuts in buyers, sellers are optimistic about this opportunity
Yang Delong, chief economist of Qianhai Open Source Fund, said that the central bank's RRR cut is part of the counter-cyclical adjustment policy. Before the holiday, the A-share market continued the trend of slow bulls and long bulls. The broad market successfully stood at 3,000 points, and the market volume increased, especially the brokerage stocks that were regarded as the market vane. The establishment of this round of cross-year market will continue Rising trend, spring offensive. According to experience, spring is often an important time window for the market to go long. This reduction is undoubtedly a catalyst for the market and will further promote the sharp rebound of the A-share market.
Full scale reduction on the first day of the new year! The release of 800 billion yuan of funds is coming?
Everbright Securities's chief banking analyst Wang Yifeng believes that the funding gap during the "double festival" period was between 3 trillion yuan and 3.5 trillion yuan. According to the preliminary estimates of the past years, the liquidity gap caused by the Spring Festival cash withdrawal is about 1 trillion to 1.5 trillion yuan; tax payment will bring about 600 billion to 800 billion yuan of liquidity withdrawn; credit investment will be a "starter" It will lead to an increase in general deposits, and it is expected that the statutory deposit reserve will be paid around 200 billion yuan; a large proportion of the special debt of 1 trillion yuan issued in advance will be implemented in January 2020.
The analysis of the central bank ’s overall RRR cut in the beginning of the year says that it is an inevitable action to maintain liquidity balance
On the 1st, the central bank announced that it will reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on January 6, 2020. This is the third round of RRR cuts since 2019. Why did the central bank choose to lower the benchmark at this time? Considering the geometry? What effect will it have on the capital market? Many analysts in the industry think that this benchmark reduction is an inevitable operation of a liquidity balance without having to read too much.
Why is it lowered? Three reasons to tell you
Lu political commissar, chief economist at Industrial Bank, believes that there are three reasons for the reduction: First, commercial bank loans have grown faster since the beginning of the year. The second reason is that local bonds were issued earlier than before. The third is when the economy is down, I hope the loan can be released faster, and I hope that the cost of financing will be reduced. The central bank also stated that the RRR cut was a hedge against cash placements before the Spring Festival, and the total liquidity of the banking system would remain basically stable, remain flexible and moderate, not flood, and the direction of sound monetary policy would not change. Since 2019, the central bank has lowered its allowance three times. Including the full-scale reduction in two implementations in January and the three-direction implementation in May ...
The central bank lowered its overall level by 0.5 percentage points: the sound tone has remained unchanged
Dong Xiaomiao predicts that China's monetary policy will maintain a stable tone in 2020, increase adjustment efforts, maintain flexibility and moderate liquidity, and find a balance among multiple goals such as stable growth, structural adjustment, and risk prevention. The new year's monetary policy will show four characteristics: first, it will continue to increase counter-cyclical adjustments to better serve stable growth; second, it will emphasize structural and directional adjustments, and will not engage in "flooding floods"; The third is to accelerate the marketization of interest rates, promote the conversion of existing loan pricing benchmarks, and improve the efficiency of financial resource allocation; the fourth is to actively and securely prevent financial risks and stabilize macro leverage.
Central Bank's overall RRR cut to meet market liquidity needs
Relevant officials of the central bank said that in this comprehensive reduction, only small and medium-sized banks such as city commercial banks operating in provincial administrative regions, rural commercial banks serving counties, rural cooperative banks, rural credit cooperatives, and village and town banks received long-term funding. More than 120 billion yuan is conducive to strengthening the financial strength of local and small-scale banks that serve private and small and micro enterprises. At the same time, the RRR cut this time reduces the bank's capital cost by about 15 billion yuan per year. Through bank transmission, the actual cost of social financing can be reduced, especially for private, small and micro enterprises.
The first day of the new year announced the release of three major signals
The RRR cut demonstrates the firm determination of the central bank to adhere to the current monetary policy. This determination is not to keep up with sharp interest rate cuts because of turbulence in international monetary policy, especially the Fed ’s interest rate cuts, which have brought global currency easing; this determination is to continue to implement a sound monetary policy, maintain flexibility and moderation, not flood flooding, and balance internal and external To maintain reasonable and adequate liquidity. In this operation of the RRR cut, the maturity and stability of the central bank's currency operations have become more evident, and they can better bear the heavy responsibility of supporting China's economic development, and can also ensure the great self-control of maintaining financial stability and curbing the outbreak of the financial crisis.
The first time in 2020 that the central bank lowered its quota six times and mentioned "supporting the real economy"
On the official website of the central bank, there were two references to the RRR cut, mentioning "supporting the real economy" up to six times. So, what kind of positive impact will the overall RRR cut have on the development of China's real economy? Several interviewed experts said that one of the more prominent effects of this overall reduction is that it can boost the infrastructure construction industry and related upstream and downstream industries, such as building materials and motors. Some experts also believe that China's current financing methods are constantly diversifying, and for innovative entities, the impact may not be great.
The central bank ’s 19th overall RRR cut since 2008 is expected to start in the spring
On the first day of 2020, the central bank sent a "big gift package"-in order to support the development of the real economy and reduce the actual cost of social financing, the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on January 6, 2020 Including finance companies, financial leasing companies, and auto finance companies).
How the central bank ’s 800 billion yuan RRR cut affects money bags
A full-scale reduction can hedge liquidity fluctuations caused by factors such as cash outflows before the Spring Festival. Similar operations were performed early last year. Wen Bin, chief researcher at China Minsheng Bank, said that the overall 0.5% reduction in line with market expectations. In view of the successive repurchase of 600 billion yuan of repurchases in January, the superimposed tax payment, the issuance of special bonds by local governments, and cash requirements during the Spring Festival, pressure on liquidity has arisen. On the one hand, more than 800 billion yuan of funds released through RRR cuts can be used. To meet the above liquidity needs, on the other hand, the release of low-cost long-term funds is conducive to reducing the bank's capital cost and guiding banks to reduce the financing cost of the real economy. It is expected that the new LPR quotation will decline slightly on January 20th, one ...
Central bank cuts 0.5 percentage point to release more than 800 billion yuan of funds
Regarding whether the RRR cut will help alleviate the problem of small and micro-sized enterprises and the difficulty of financing for private enterprises, the relevant person in charge of the central bank said that the RRR cut has increased the source of funds for financial institutions, and that it is an urban commercial bank and service operating only in provincial administrative areas. Small and medium-sized banks such as rural commercial banks, rural cooperative banks, rural credit cooperatives, and village and township banks in the county have obtained more than 120 billion yuan of long-term funds, which is conducive to strengthening the financial strength of small and medium-sized banks serving local and returning to the origin and serving private enterprises. At the same time, the RRR cut this time reduces the cost of bank funds by about 15 billion yuan per year. Through bank transmission, the actual cost of social financing can be reduced, especially for small, micro, and private enterprises.
The central bank will issue a "comprehensive RRR cut" package at the beginning of the year. There is still much room for monetary policy operations in 2020.
Looking forward to future monetary policy operations, Liao Zhiming, chief analyst of Tianfeng Securities Banking, said that considering the impact of the Spring Festival cash withdrawal on liquidity, it is expected that the central bank will also adopt MLF and 28-day reverse repurchase to provide liquidity and maintain liquidity. Reasonably abundant. Wen Bin said that in the next stage, there is still room and necessity for overall reduction. Combined with directional reduction, it is expected that there will be 2-3 reductions.
New Year's Day Central Bank sends down quasi-red envelopes to release 800 billion yuan of funds
According to relevant statistics, after November 30, 2011, the central bank made a total of 14 reductions (excluding this time). But 7 of them were directional reductions, 5 were comprehensive + directional reductions, and only 2 were overall reductions. For the A-share market, the 7-point directional RRR cut has 4 mixed declines and 3 increases on the next day, which is a mixed picture. The two purely comprehensive RRR cuts occurred on February 29, 2016, the next day the Shanghai Index rose by 1.68%; as of April 14, 2016, the Shanghai Composite Index rose from a maximum of 2700 points to 3082 points. The other happened on January 4, 2019, the next day the Shanghai index rose 0.72%; to April 8, a wave of spring offensive was completed, and it continued to rise from around 2440 points ...
People's Bank of China Decides to Reduce the Deposit Reserve Ratio of Financial Institutions on January 6
According to the website of the central bank, in order to support the development of the real economy and reduce the actual cost of social financing, the People's Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on January 6, 2020 (excluding finance companies, financial leasing companies and auto finance the company). The People's Bank of China will continue to implement a prudent monetary policy, remain flexible and appropriate, not flood flooding, take into account internal and external balance, maintain reasonable and adequate liquidity, and increase the scale of monetary credit and social financing in line with economic development and stimulate market vitality. High-quality development and supply-side structural reforms create a suitable monetary and financial environment.
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