What Is The Impact Of The Central Bank'S Announcement On The Cotton, Textile And Clothing Industries?

On the last day of the national day of October 7th, the Central Bank of China announced that it would reduce the deposit reserve ratio of some financial institutions by 1 percentage points in October 15th to replace the medium-term loan facility (MLF) that expires on the same day.

Since October 15, 2018, the RMB deposit reserve ratio of large commercial banks, joint-stock commercial banks, urban commercial banks, non County commercial banks and foreign-funded banks has been reduced by 1 percentage points, and the medium-term loan facility (MLF) that expires on that day will no longer be renewed.

In addition to this part, RR can release additional funds of about 750 billion yuan.

It can increase the funding sources of financial institutions to support small and micro enterprises, private enterprises and innovative enterprises, so as to enhance the vitality and toughness of economic innovation, enhance the driving force of endogenous economic growth, and promote the healthy development of the real economy.

Zhang Ming, chief economist of Ping An Securities, believes that after this reduction, the probability that the central bank will continue to lower its accuracy rate within this year will be smaller. The next reduction will be possible before the Spring Festival early next year.

Earlier, analysts in the industry pointed out that the central bank lowered its cotton prices.

The effects are briefly summarized as follows:

01, it will help solve the financial problems involved in cotton and textile enterprises, and credit support will be increased.

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

First of all, help 2018/19 seed cotton purchase and processing, to protect farmers' income; second,

The capital of traders and textile enterprises is replenished, which is conducive to the stability of cotton prices and the medium and long-term development of the market. Textile enterprises appropriately increase the storage of cotton and other materials to avoid the risk of huge fluctuations such as Zheng cotton and ICE, and again, facilitate the sale of cotton in 2017/18 and speed up the return of funds.

02 stimulating domestic consumption of cotton and textiles and clothing is a positive fact for the whole industry.

If liquidity is appropriate and loose, it will be good for the people to invest or borrow money. At least, the cost of borrowing will not rise further. Even in the future, there may still be a decline. Therefore, in the case of stable financing costs and market confidence recovery, domestic consumption and investment are expected to go down.

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The production and sales of small and micro enterprises such as clothing will be fully restored and even enter the "fast lane". Steady production and consumption promotion will become a top priority.

03 the government's determination to implement a prudent monetary policy will give cotton and textile enterprises "reassurance".

Under the pressure of economic growth in the second half of this year, capital constraints and risks arising from the decline of financing growth under the background of financial regulation are becoming more and more obvious. It is an inevitable option to achieve precise control through reducing the accuracy and mitigate the impact of deleveraging on small and micro enterprises.

From the perspective of monetary policy, liquidity is continuously lowered and the confidence of SMEs, such as cotton, textiles and clothing, has been restored.

Although the market is expected to have a reduction in the pre holiday period, it is generally expected that the structural reduction will be achieved. The reduction is a 1 percentage point reduction in all kinds of financial institutions, exceeding the market expectations.

After the Fed raised interest rates in September, the Central Bank of China did not follow the upward trend of the open market interest rate, nor would it consider raising interest rates because of inflation and housing prices.

Today, there is an objective and strong need for steady growth and stable credit for low interest rate environment, so there will not be a monetary policy combination of lowering interest rates and raising interest rates.

The stability and continuity of monetary policy, together with the coming tax reduction measures and investment projects that are being rapidly invested, should not be expected from broad money to wide credit.