What Is The Impact Of The Cotton, Textile And Clothing Industries?

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The people's Bank of China has decided to reduce the RMB deposit reserve ratio of large state-owned commercial banks, joint-stock commercial banks, postal savings banks, urban commercial banks, non County Rural Commercial Banks and foreign-funded banks by 0.5 percentage points from July 5, 2018, thus releasing a total of about 700 billion yuan.

　　 At 5:00 p.m. on June 24, the expected major positive finally came: the central bank announced the "targeted reduction of the reserve rate"!

According to the central bank's website, in order to further promote the marketization and legalization of "debt to equity swap" and increase support for small and micro enterprises, the people's Bank of China has decided to reduce the RMB deposit reserve ratio of large state-owned commercial banks, joint-stock commercial banks, postal savings banks, urban commercial banks, non County Rural Commercial Banks and foreign-funded banks by 0.5% from July 5, 2018 Points.

The specific measures of this directional calibration reduction also include the following aspects:

1. Encourage 5 large state-owned commercial banks and 12 joint-stock commercial banks to implement the "debt to equity" project in accordance with the market-oriented pricing principle by using the funds raised from the market. We should support the implementation subject of "debt to equity swap" to truly exercise shareholders' rights, participate in corporate governance, and promote mixed ownership reform.

2. The targeted RRR reduction funds do not support the projects of "famous stocks and real debts" and "zombie enterprises".

3. Small and medium-sized banks, such as postal savings bank, city commercial bank and non County Agricultural commercial bank, should mainly use the reduced reserve fund for small and micro enterprises' loans, and strive to alleviate the problem of financing difficulty and high financing cost of small and micro enterprises.

　 This is a rare move by the central bank to simultaneously "reduce the reserve requirements" and "cut interest rates".

　　 What will be the impact of the release of 700 billion funds on China's cotton, textile and clothing industries? The impact of the central bank's RRR reduction on the cotton and textile industries is summarized as follows:

1. It will help to solve the financial problems of cotton and textile enterprises, and the credit support will be increased.

With the focus of the central bank, government funds and the government turning to millions of small and micro enterprises, especially accelerating the "debt to equity swap", the tight cash flow pressure of cotton related enterprises is expected to be effectively alleviated.

First of all, support farmers to purchase cotton seeds in 2018 / 19;

Secondly, the funds of Cotton Traders and textile enterprises have been supplemented, which is conducive to the stability of cotton price and the medium and long-term development of the market. Textile enterprises should appropriately increase the storage of cotton and other materials to avoid the risk of huge fluctuations in Zheng cotton and ice;

Thirdly, it is conducive to cotton sales in 2017 / 18 and accelerates the return of funds.

2. Stimulating domestic consumption of cotton, textiles and clothing will benefit the whole industry.

If the liquidity is appropriately loose, it will be good for people to invest and borrow. At least, the cost of borrowing will not rise further, and even may decline in the future. Therefore, with the stable financing cost and the recovery of market confidence, domestic consumption and investment are expected to go out of the trough, and the production and sales of small and micro enterprises such as cotton, textile and clothing will be fully recovered It is an urgent task to drive into a "fast track" and promote production.

3. The government's determination to implement a stable monetary policy gives cotton and textile enterprises "reassurance"

China's economic growth in the second half of the year is under pressure. Under the background of capital constraints and financial supervision, the risks brought about by the decline of financing growth rate are becoming more and more obvious. It is an inevitable choice to realize precise regulation and control and alleviate the impact of deleveraging on small and micro enterprises through "reducing reserve requirements". From the monetary policy point of view, continued to reduce the reserve rate to release liquidity, cotton, textile, clothing and other small and medium-sized enterprises confidence continued to restore.

Other macro interpretation

Liu Xiaobo, a financial writer, commented on this

1. According to the central bank's response to reporters' questions, the current RRR reduction can release 700 billion basic currency. Under the current monetary multiplier of about 5.4 times, the broad currency m2 of 3.78 trillion can be derived theoretically.

Of course, after the RRR reduction, the currency multiplier of RMB will be enlarged. However, whether or not the M2 of 3.78 trillion (or more) can be derived depends on the enthusiasm of enterprises and banks for loans.

There is no doubt that this is a big policy positive. The released funds are also long-term funds, which are more convenient than the reverse repurchase and medium-term borrowing used by the central bank. The cost of the released funds is lower and the time is longer. This is conducive to reducing the interest rate of the market, which is good for the stock market, the property market and the real economy.

2. The targeted reduction of the standard was made by the executive meeting of the State Council. This time, the central bank added a name: "debt to equity swap".

"Debt to equity" means that the bank "loans into shareholders". Through debt to equity swap, some bad loans can be stripped off. On the one hand, it is conducive to reducing the financial burden of enterprises, but also conducive to the bank to have a good report and short-term performance.

Therefore, the RRR reduction is beneficial to bank stocks in the first place. Bank stocks are the most weighted sector of a shares. Stabilizing bank stocks is conducive to stabilizing a shares.

3. On the surface, "targeted RRR reduction" is mainly aimed at the real economy, and has nothing to do with the property market. In fact, bank funds always flow into the property market in various ways. Because of the high rate of return on the property market, this reduction in the reserve ratio is also good for the property market. Real estate stocks in a shares have begun to strengthen.

4. Will the stock market rebound sharply tomorrow (June 25)? It may open higher, but it is hard to say whether it can be stabilized. The RRR reduction is expected. If we can't make a good stock market, we should make good use of it and continue to explore the bottom. At present, the bottom of A-share market has not been found out, so we should be careful!

Previous directional reductions

From the following day, the Central Bank of Shanghai has officially announced the reduction of the reserve rate for four times.

The latest announcement of the central bank's targeted RRR reduction occurred on the eve of last year's national day. After the central bank announced the targeted reduction on September 30 last year, the Shanghai index rose 0.76% on the first trading day after the National Day (October 9).

From the content of the latest meeting of the State Council, the purpose of targeted RRR reduction is to alleviate the financing difficulties and high financing cost of small and micro enterprises.

On June 20, according to the news on China government website, in order to further ease the financing difficulties and high financing costs of small and micro enterprises, and continuously promote the cost reduction of the real economy, the fourth mentioned supporting banks to develop small and micro enterprise markets, and using monetary policy tools such as targeted reduction of reserve requirements to enhance the supply capacity of small and micro credit.

Huang Yiping, vice president of the National Development Research Institute of Peking University and director of the digital Finance Research Center, believes that there are two main reasons for this

First, the credit system is not perfect;

Second, the market system is not perfect, and it is difficult for small and micro enterprises to obtain financing from formal financial institutions.

Ping An Securities research paper also believes that there are two reasons:

On the one hand, banks have no willingness to provide funds to small and micro enterprises which are generally in poor business conditions;

Second, because the enterprise itself does not have the power of development and innovation, even if it obtains funds, it is likely to transfer into real estate and other industries to obtain high profits.

What supporting policies are needed?

Researchers believe that without the relevant reform support, financial leverage reduction "single soldier sudden advance", although there is a targeted monetary policy, but the flow of funds is still unable to flow smoothly to the departments the government hopes.

According to the contents of the announcement on the State Council's website on June 20, this time, four supporting measures were also introduced, including:

1. Increase the amount of loans and rediscount to support small and micro enterprises and "agriculture, rural areas and farmers", and reduce the interest rate of small-scale loans;

2. From September 1 of this year to the end of 2020, the loan interest income of small and micro enterprises and individual industrial and commercial households that meet the requirements will be exempted from value-added tax; the upper limit of single credit line will be increased from 1 million yuan to 5 million yuan;

Third, it is forbidden to charge small enterprises with capital management fees;

4. Small and micro enterprise loans with a single credit of 5 million yuan or less shall be included in the scope of qualified collateral for medium-term loan facilities.

From the current situation, the establishment of an effective credit rating system, the bankruptcy of zombie state-owned enterprises and the establishment of a long-term real estate mechanism are also in progress.

[attachment] central bank answers questions from reporters

1. What are the specific contents of the targeted RRR reduction to support marketization and legalization of "debt to equity" and financing of small and micro enterprises?

A: there are two main aspects of this landing

First, from July 5, 2018, the RMB deposit reserve ratio of five large state-owned commercial banks, including ICBC, ABC, BOC, CCB and bocom, as well as 12 joint-stock commercial banks, including China CITIC Bank and Everbright Bank, will be reduced by 0.5 percentage points. About 500 billion yuan of funds can be released to support the marketization and legalization of "debt to equity" project, and leverage the same scale of social capital participation And. Relevant banks should establish standing books, record the implementation of marketization and legalization of "debt to equity swap" in detail, and submit quarterly reports to the people's Bank of China and other relevant departments.

At the same time, the deposit ratio of RMB 200 million for small and micro businesses in rural areas can be reduced, and the main financing problems of small and micro businesses in rural areas can be further reduced by 200 million yuan, which can be used to support small and micro businesses in rural areas. Financial institutions' use of reduced reserve fund to support "debt to equity" and financing of small and micro enterprises will be included in the macro Prudential assessment of the people's Bank of China.

2. What are the main considerations for the targeted reduction of the reserve requirements to support the marketization and legalization of "debt to equity" and financing of small and micro enterprises?

A: the executive meeting of the State Council on June 20 was to implement the plan.

Since the beginning of this year, the signing amount and funds of marketization and legalization of "debt to equity" are relatively slow. Considering that large state-owned commercial banks and joint-stock commercial banks are the main force of marketization and legalization of "debt to equity", we can release a certain amount of long-term funds with appropriate cost through targeted reduction of reserve requirements, form positive incentives, improve their ability to implement "debt to equity" and accelerate the implementation The signed "debt to equity" project was implemented.

At the same time, the financing difficulty and high financing cost of small and micro enterprises in China are still prominent. Postal savings banks, city commercial banks and non County Agricultural commercial banks play an important role in supporting small and micro enterprises. The implementation of targeted reduction of reserve requirements is conducive to enhancing the supply capacity of small and micro credit, increasing the loan input of banks for small and micro enterprises, reducing the financing cost of small and micro enterprises, and improving the financial services for small and micro enterprises.

On the whole, the targeted RRR reduction is conducive to steadily promoting structural deleveraging and increasing support for small and micro enterprises and other weak links, which belongs to targeted regulation and precise regulation. The people's Bank of China will continue to implement a stable and neutral monetary policy to create a suitable monetary and financial environment for high-quality development and supply side structural reform.

3. What conditions should be met for the "debt to equity" project supported by the targeted reduction of reserve requirements?

We should pay attention to the following 17 Principles to encourage large and medium-sized commercial banks to make full use of their capital

First, the implementation subject should realize the real equity investment in the "debt to equity" project, rather than the "debt to debt" project which still aims to obtain fixed income, that is to say, it does not support the project of "famous shares and real debts";

Second, we should encourage relevant banks and implementing entities to leverage social funds to participate in the "debt to equity" project at a ratio of no less than 1:1;

Third, the relevant shares of "debt to equity" and related debt write down should strictly follow the market-oriented pricing, and be determined by the relevant project participants through negotiation in accordance with laws and regulations;

Fourth, we should support all kinds of ownership enterprises to carry out market-oriented and legalized "debt to equity swap". The relevant implementation subjects should really participate in the corporate governance of enterprises after the "debt to equity swap", promote the improvement of their corporate governance level, and promote the reform of mixed ownership;

Fifthly, the implementation of the "debt to equity" project should be conducive to improving the structure of enterprise assets and liabilities, restoring the momentum of enterprise development, and not supporting the debt to equity swap of "zombie enterprises".