Due to the persistent impact of the COVID-19 epidemic, the global economy has been fluctuating to varying degrees, while the stability of China's economy is still outstanding. The early recovery of production capacity has played a very important role in China's economic recovery. In the process of economic recovery, various institutions have exercised their corresponding responsibilities, such as the financial and monetary policies of the central bank. As can be seen from its work report, the central bank paid 1 trillion profits. What does this mean? Let's have a look.

What does it mean for the central bank to turn over 1 trillion profits?

The People's Bank of China said that in accordance with the spirit of the Central Economic Work Conference and the deployment of the government work report, in order to enhance the available financial resources, the People's Bank of China turned over surplus profits to the central government this year, with a total amount exceeding 1 trillion yuan, which was mainly used to offset tax rebates and increase transfer payments to local governments to support enterprises to get rid of difficulties, stabilize employment and protect people's livelihood. According to industry analysis, it is equivalent to an overall reduction of 50BP in RRR and an increase of deficit ratio 1% in financial expenditure support.

In fact, the fact that the central bank turned over surplus profits to the central finance has been mentioned in official documents. In the 2022 government work report, it is proposed that some state-owned financial institutions and franchisees will be paid the profits accumulated in recent years according to law this year.

The relevant person in charge of the Ministry of Finance said that it is a common practice in China to arrange specific state-owned financial institutions and franchisees to turn over profits, and it is also an important means to coordinate financial resources and adjust funds across the year, including China Tobacco Corporation and China Investment Corporation, among which the People's Bank of China is also one of the turning-over units.

According to Article 39 of the Law of the People's Republic of China on the People's Bank of China, the income of the People's Bank of China in each fiscal year is deducted from the annual expenditure, and the net profit after the total reserve is drawn according to the proportion approved by the financial department of the State Council is turned over to the central finance. The profits paid by the People's Bank of China conform to Chinese laws.

Where does the central bank's profit come from?

Although the People's Bank of China is a specialized central bank, it also has income, including interest income, that is, interest income from refinancing and rediscounting by financial institutions. Business income, that is, foreign exchange reserve business income, gold and silver business income, securities trading income, etc. ; And other income.

The balance profit of the People's Bank of China mainly comes from the operating income of foreign exchange reserves in the past few years, which will not increase the burden of taxes or economic entities, nor is it a fiscal deficit. The People's Bank of China will turn over the surplus profits to the central finance in accordance with the law, which will not lead to financial overdraft of the central bank. Balance profits are paid in a balanced manner on a monthly basis, and the balance sheet size of the People's Bank of China remains stable, which reflects the coordination and linkage of monetary policy and fiscal policy, and * * * works together to stabilize the macroeconomic market.

The influence of the central bank's comprehensive RRR interest rate cut

RRR cut is one of the monetary policies, which means that the central bank reduces the statutory deposit reserve ratio and increases the bank loanable funds, thereby increasing the money supply in disguise, releasing liquidity and promoting economic growth.

For example, the statutory deposit reserve ratio of 20% means that financial institutions need to pay 20 million reserves to the central bank for every 654.38 billion deposits. If the central bank reduces the statutory deposit reserve ratio to 654.38+00%, financial institutions only need to pay 654.38+billion reserves to the central bank for every 654.38+billion deposits, which means that financial institutions have 654.38+0 more.

For banks, increasing their loanable funds will increase their loan business to a certain extent, thus promoting the rise of bank shares; For enterprises, it can alleviate their financing difficulties and reduce their financing costs to a certain extent.