This is in just half a year, the central bank adjusted the deposit reserve ratio three times in a row. The first two increases were as follows: on June 16, the central bank announced that it would increase the deposit reserve ratio of deposit-taking financial institutions by 0.5 percentage points from July 5; On July 2 1 day, the central bank announced that the deposit reserve ratio of deposit-taking financial institutions would be raised by 0.5 percentage points from August 15.
Why does the deposit reserve ratio, which is usually regarded as a "hatchet" by mature market economies, become a frequently used policy tool in China?
The liquidity problem between financial systems is once again highlighted.
First, raising the statutory reserve ratio aims at recovering liquidity. Since the beginning of this year, the People's Bank of China has comprehensively used various monetary policy tools (see chart 1) to recover liquidity in the banking system, and the excess liquidity has eased, which is manifested in the recent slowdown in the growth of money and credit.
However, the current balance of payments surplus is still outstanding. The current account surplus rose from 7. 1% of GDP in 2005 to 8% in the first half of this year. In the first three quarters, the foreign trade surplus further expanded, and the new excess liquidity in the banking system is still emerging. The monetary and credit indicators are still significantly higher than or even exceed the expected targets of the People's Bank of China. According to the dynamic changes of liquidity, the People's Bank of China raised the deposit reserve ratio again to consolidate the effectiveness of liquidity regulation.
Second, domestic economic growth is still hot. Under the influence of a series of regulatory policies, the growth rate of fixed assets investment declined in July and August, but began to pick up in September. The growth rate of investment in fixed assets is still twice that of consumption. External demand may weaken with the slowdown of American economy, and the substantial expansion of investment will lead to overcapacity, deflation and high bad debts of banks in the future. [Related reading: Can China's monetary policy readjust the reserve ratio? ]
Fine-tuning methods have limited impact on the market.
By the end of September, the increase in foreign exchange reserves was 1 696,543.8 billion USD, which became the main driving factor for the growth of the base currency. New loans in RMB reached 2.76 trillion yuan, exceeding the annual target of 2.5 trillion yuan, which is much higher than the historical average (see chart 2). Although the loan growth rate has slowed down in recent months and the money multiplier has dropped slightly, the money multiplier is still at a high level, indicating that the credit expansion ability is still very strong and the medium and long-term loans are still growing rapidly. Since the beginning of this year, a large number of loans issued by banks, especially medium and long-term loans, have provided financial guarantee for the possible further rebound of future investment.
In addition, as the year is approaching, banks usually have a strong desire to lend at the beginning of the year, that is, "lending early and making profits early". Tightening liquidity at this time will help curb the sharp rebound in loan growth early next year. The end of the listing of large state-owned commercial banks also provides conditions for tightening liquidity at this time.
At present, China's apparent inflation rate is low, and the CPI index rose by 1.3% in the first nine months, making it difficult to raise interest rates. In addition, the US economy only grew by 1.6% in the third quarter, which was significantly slower than the 5.6% in the first quarter and 2.6% in the second quarter. Therefore, the market expects the United States to cut interest rates next year, and the timing is also advanced (many investment banks have advanced the expectation of the US interest rate cut from the middle of the year to the first quarter). Raising interest rates may further narrow the spread between China and the United States, leading to greater expectations of RMB appreciation.
How big is the impact of raising the statutory reserve ratio on the economy and the market? The effect of raising the statutory reserve ratio on restraining loan growth depends on the level of the bank's excess reserve ratio. At present, the excess reserve ratio has been lowered from 3. 1% in the middle of the year to 2.5% at the end of September. On the whole, the role of raising the statutory reserve ratio is increasing. Of course, different banks have different levels of excess reserves, and banks with small positions are more affected. Banks with large positions are often large banks and may need window guidance to curb loan growth. Because banks with tight positions in the market usually need to borrow money from banks with loose positions In this sense, the increase of the statutory reserve ratio has a negative impact on the profits of the former, while it has a certain positive impact on the latter.
It has little impact on the real economy. Raising the statutory reserve ratio by 0.5 percentage point will instantly lock in the liquidity of 654.38+0639 billion. Even if the multiplier effect is considered (the currency multiplier is 5.0 1 at the end of September), the return liquidity will be 8.2 1 1 billion, accounting for only 2.47% of the current M2. Therefore, the money market interest rate will increase during the year, but the profit rate of enterprises is also improving (see chart 3), which has little impact on the overall profit of enterprises. Of course, industries that rely heavily on bank loans are more affected.
It may have a short-term impact on the stock market. Recently, the market has been excited and the stock price has soared. Many market participants believe that there will be no monetary tightening policy during the year. This "guidance" may be unexpected. The possibility of stock price adjustment in the short term is not ruled out. However, we believe that this adjustment provides a good opportunity to buy shares of companies with strong fundamentals and benefiting from the appreciation of the RMB. [Related reading: Raising the reserve ratio has limited impact on the stock market, and it is unlikely to raise interest rates during the year]
The root of excess liquidity is still there.
The increase in the statutory reserve ratio will make the monetary growth rate reach or approach the target of 16% set by the central bank at the beginning of the year, and the new loans are expected to be controlled at around 3 trillion. It is difficult to raise the statutory reserve ratio or raise interest rates again during the year. However, the RMB will continue to appreciate, and the pace of capital account opening will gradually accelerate. It is difficult to completely reverse the problem of large liquidity in the short term, and China's economy will still maintain strong growth.
How to fundamentally solve the problem of excess liquidity? The fundamental reason for China's current large liquidity is the massive inflow of foreign exchange under the double surplus of international payments, which has suppressed the base currency after settlement. In addition, the profits of banks are in the forefront after the restructuring, but at present, banks in China lack other profit channels except lending, which makes the currency multiplier tend to rise. The pressure of the increase of foreign exchange reserves on the base currency and the increase of the currency multiplier have accelerated the growth of the currency. In fact, in the foreseeable future, China's foreign trade surplus will continue to grow, because the change of population structure leads to a high savings rate, the upgrading of industrial structure makes the export competitiveness constantly improve, and the early capacity expansion intensifies the import substitution.
It is difficult for RMB appreciation to significantly reduce the foreign trade surplus, but gradual appreciation is beneficial to China itself. It is conducive to promoting the upgrading of industrial structure and forcing exports to shift to high value-added industries. It is conducive to encouraging enterprises in coastal areas to move inland (the so-called "going in"), thus narrowing the development differences between regions. In this sense, RMB appreciation is conducive to building a harmonious society.
In the case that the current account surplus is difficult to eliminate, maintaining the basic balance of international payments requires a deficit in the capital account. Therefore, China will change the foreign exchange management policy of "lenient entry and strict exit" implemented for many years, and seek channels for capital outflow through various ways, including foreign direct investment, foreign loans and overseas portfolio investment. For example, broadening the investment scope of QDII not only opens up the channel of "going out" of funds, but also increases the profit channels of domestic banks. This is also out of consideration for China's own interests.
High savings rate and closed capital account can easily lead to over-investment and asset price bubbles. At present, the working-age population in China is still rising, so the savings rate is very high. However, after five years, the population structure will be aging, and then the savings rate will begin to decline. The asset price pushed up during the rising savings rate is difficult to maintain during the falling savings rate, which is the fundamental reason why the asset price bubble in Japan at that time expanded to burst. Therefore, the opening of the capital account is conducive to smoothing out the fluctuations in asset prices brought about by demographic changes.