The central bank lowered its benchmark to release about 900 billion yuan

According to the official website of the Central Bank, on September 16, 2019, the central bank decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points (excluding financial companies, financial leasing companies and automobile finance companies); and to reduce the deposit reserve ratio by an additional 100 percentage points for urban commercial banks operating only in provincial administrative areas. Point by point, two implementation in place. The reduction releases about 900 billion yuan of long-term funds. Among them, about 800 billion yuan was released by comprehensive reduction and about 100 billion yuan was released by directional reduction.

According to Guoxin Securities Statistics, since this century, the central bank has lowered its benchmark in September 2008, December 2011, February 2015, April 2018 and January 2019, respectively. Historic experience shows that the A-share market is slightly more likely to continue declining in one month after the central bank started the benchmark reduction, while the probability of rising and falling in three months and six months after the first comprehensive benchmark reduction accounts for half of the total.

Combining general and directional alignment

Why are financial companies, financial leasing companies and automobile financial companies not included in the comprehensive alignment range? In response, the central bank officials said that the statutory reserve ratio of financial companies, financial leasing companies and automobile financial companies was 6%, which was the lowest among financial institutions and was at a low level. Therefore, the comprehensive reduction did not include these three types of financial institutions. It is worth noting that in order to increase support for small and private enterprises, the central bank decided to reduce the deposit reserve ratio by an additional 1 percentage point for urban commercial banks operating only in provincial administrative areas, which was implemented twice on October 15 and November 15, with a reduction of 0.5 percentage points each time. Fan Ruofeng, a researcher at the International Finance Research Institute of the Bank of China, told Daily Economic News. "This is a combination of comprehensive and directional reduction, which not only fully demonstrates the intention of the central bank to protect the smooth operation of the real economy, but also reflects the support of structural monetary policy for private and small and micro enterprises." In Fan Ruofeng's view, the reduction is mainly considered from the following aspects: the current economy of China is facing greater downward pressure, the importance of "stable growth" is becoming more and more prominent; the global central bank monetary policy has been restarted to relax, which provides more space for China's monetary policy; although inflation has upward pressure, it is mainly affected by The impact of pork price rise is a short-term factor, and the core CPI is not high, which does not cause significant constraints on monetary policy. Er Yongjian, chief financial analyst of Jinyan Center of Bank of Communications, pointed out that the financing costs of real economy, especially small and micro enterprises, still need to be further reduced, and the directional reduction is still intended for Precise Drip irrigation. In addition, the Fed may cut interest rates in September, and the central bank may release liquidity in advance by lowering the benchmark, possibly to provide conditions for the next reduction in MLF interest rates. Did the downgrading of steady monetary policy orientation remain unchanged.

On such a scale mean that the monetary policy orientation has been adjusted? In this regard, Fan Ruofeng believes that, on the whole, the tone of sound monetary policy has not changed. In September, the fund gap is large, and the reduction of the standard has played a hedging role to a certain extent, which meets the needs of "steady growth" of China's economic operation.

Relevant central bank officials pointed out that the reduction will hedge with the tax period in mid-September, and the total liquidity of the banking system will remain basically stable, and the implementation of the directional reduction in two times will also be conducive to the safe and orderly release of funds. Therefore, the reduction is not a flood of water, and the orientation of sound monetary policy has not changed.

The central bank officials said that the reduction would reduce the cost of bank funds by about 15 billion yuan per year, and the real interest rate of loans could be reduced through bank transmission. Directional reduction is an important measure to improve the policy framework of "three grades and two advantages" for small and medium-sized banks with low reserve requirement ratio, which is conducive to promoting urban commercial banks serving the grass-roots level to increase their support for small and small private enterprises. All these are conducive to supporting the development of real economy.

So, is there any room for lowering interest rates in the future? In this regard, Wenbin believes that, in the context of the resumption of monetary easing by the global central bank, combined with China's current macroeconomic operation, inflation level and business operation, there is room and necessity for the reduction of policy interest rates.