August Slow Provision Reserve Banking Pressure Remains

Market expectations of monetary policy are undergoing subtle changes.

In July 31st, when the State Administration of Taxation announced that the export tax rebate rate of some textile and garment products was raised to 13%, investors finally saw the beginning of macro-control in the second half of the year.

With the economic policy of the Central Politburo in the second half of the year set as "one insurance and one control" (maintaining steady and rapid economic development and controlling the excessive price rise), the fine-tuning of tight monetary policy has become the focus of attention.

"Although the measure is more cautious, it is a clear signal from a series of fine-tuning policies.

Second more obvious fine-tuning measures may be that the central bank will stop further monetary tightening measures in August, such as raising interest rates or raising the deposit reserve ratio.

A scholar close to the top of the central bank said.

In the first half of the year, banks with high reserve requirements could not breathe a sigh of relief.

Even if the deposit reserve ratio is not raised, the credit scale will still be restricted, and the ability of credit assets will still be affected.

Slow provision reserve in August

Before the announcement of the export rebate rate of some textile and garment products was officially released, our reporter took the lead in disclosing the news (see the July 14th article "textile and garment export tax rebate").

However, on the day of the announcement of the export rebate rate of textile and garment products, the market did not rebound substantially from this stimulus, but on the contrary, it showed a mild performance.

On the same day, the Shanghai composite index continued the trend of the previous day, down 2.15%, closing to 2775.

"Now investors are looking for more robust fine-tuning policies, such as halting interest rates or raising reserve requirements in August.

If the central bank stops further tightening in mid August, the market may be strongly encouraged, otherwise investors will continue to see empty selling.

A private equity fund manager in Beijing said.

In fact, since 2008, the central bank has kept almost the frequency of raising the deposit reserve ratio once a month.

In the first half of the year, the deposit reserve ratio has increased 5 times, especially after the two consecutive increase in the deposit reserve ratio in June, reaching a historical high of 17.5%. The frequent and intense tight monetary policy is beyond market expectations. It is considered to be the "only one" in the past ten years.

On the other hand, the tight monetary policy has made the total growth of the money supply no obvious decline, still at a relatively high level.

At the end of 6, the balance of broad money supply (M2) was 44 trillion and 310 billion yuan, an increase of 17.4% over the same period last year, an increase of 0.63 percentage points from the end of last year, while narrow money (M1) grew by 14.2% over the same period last year.

In July 25th, after the economic forum of the Political Bureau of the Central Committee of the CPC, the macroeconomic regulation and control keynote of "one insurance and one control" replaced the "double defense" (preventing economic overheating and preventing inflation).

Under the background of macroeconomic policy adjustment, it is very possible to stop tightening monetary policy in August.

Rate hike is expected to weaken

In addition to slowing down the deposit reserve rate, the possibility of raising interest rates in the second half of this year has also been greatly reduced, mainly due to the expected decline in CPI.

"Food prices rose nearly 3 percentage points from the previous month in July, pushing CPI growth down 0.9 percentage points, and expected a 6.4% increase in CPI in July.

For the purpose of stabilizing the economy, the possibility of raising interest rates has been little. "

Shenyang Wanguo senior macroeconomic analyst Li Huiyong said.

JP Morgan's latest research report predicts: "there is little possibility of raising interest rates during the year, and the deposit reserve ratio will not rise again."

J.P. Morgan's reason is that raising interest rates and raising the deposit reserve ratio are regarded as the overall tightening tools applicable to all sectors.

According to the new policy guidelines, China's austerity policy will be "as appropriate".

"The possibility of raising interest rates in August is very small."

Economists close to the top of the central bank said, "but in August, raising interest rates or raising the reserve requirement rate did not mean loosening monetary policy. In fact, it was only a fine adjustment in the rhythm of tight monetary policy.

More importantly, the current credit regulation has not been relaxed in the total amount, and the future is more structured on small and medium sized enterprises or the provinces of the disaster stricken provinces.

In addition, from the perspective of preventing hot money, the possibility of raising interest rates is not great.

At present, the RMB one year deposit rate is 4.14%, while the US benchmark interest rate is 2%.

As a result, there is a 2.14% interest rate difference between the RMB and the US dollar. Moreover, since the first half of this year, the renminbi has risen by more than 6% against the US dollar, so that even if the venture capital does not invest in other countries, the exchange of US dollars into Renminbi will still get at least 7% of the risk free return.

Once interest rates are increased, the momentum of hot money inflows is greater.

No change from tight tone.

"The central bank has tightened its liquidity policy in the banking system and reduced the profitability of credit assets.

From this perspective, it has a certain impact on bank profitability.

A joint-stock bank capital department general manager told reporters.

It is true that in the first half of the year, the reserve requirement ratio has been raised continuously. Banks need to reconfigure their assets. Higher yield credit funds are used to invest in low yield products such as central bank bonds and bonds.

However, the general manager of the fund department pointed out that interest rates in the bond market increased steadily after the first 4 increases in reserve requirements this year.

That is to say, although the scale of credit has tightened, banks can get profits from bond investments and partly offset the negative impact of the increase in the deposit reserve ratio on bank performance.

"If the reserve requirement ratio will not be further improved in the second half of the year, but the central bank will control the total amount of credit, there will be no change in the tight tone of monetary policy."

He said.

The general manager of the fund department believes that even if the reserve requirement ratio and liquidity are restated in the second half of the year, the bank balance will increase substantially, which will provide the bank with more abundant sources of funds.

Central bank data show that at the end of 6 2008, the balance of RMB deposits of financial institutions was 43 trillion and 900 billion yuan, up 18.85% over the same period last year.

In the first half of the year, RMB deposits increased by 49649 billion yuan, an increase of 15774 billion yuan over the same period.

In view of this, the capital market continues to slump, and social capital is still choosing to return the bank deposit system.

"Now banks will not be unable to lend because they have no funds.