There Is Still Room For Reduction In The Deposit Rate. There Will Be More And More Consensus In The Exchange Rate Between China And The United States.

China has lowered the deposit reserve rate for the five time since last year. The Central Bank of China held a press conference on Sunday at the two sessions, saying that there is still room for reducing the deposit reserve ratio in the future, but it is much smaller than in previous years. It will gradually shift to the "three stalls" deposit reserve ratio framework and distinguish between banks and small banks.

In the process of Sino US trade frictions intensified, the RMB exchange rate has always been the focus of attention. The central bank governor Yi Gang said at the press conference that in the seventh round of trade negotiation negotiations just concluded, the exchange rate issue was indeed discussed. He also said that China and the United States have reached a consensus on many key and important issues.

In response to questions about whether China has made any concession on the exchange rate issue, Yi Gang said that in the discussion of the exchange rate formation mechanism and China's future market direction and market construction process, "we will have more and more consensus and confidence will be more and more sufficient."

"We discuss that both sides should abide by previous G20 summit commitments, such as no competitive devaluation and no exchange rate for competitive purposes. And the two sides maintain close communication on the foreign exchange market. " He said.

In addition, he revealed that both sides should also adhere to the principle of market determined exchange rate system, respecting the monetary authorities of the other side and deciding the autonomy of monetary policy, and both parties should undertake to disclose data in accordance with the IMF spanparency standards.

In 2018, when the yuan first rose and then fell, and during the period approaching 7, the Bank of China resumed the risk reserve policy and counter cyclical factor of the 20% forward purchase of foreign exchange, so as to stabilize the pressure on foreign exchange purchase and the expectation of depreciation. In those days, the RMB fell more than 5%. But in 2019, with the gradual deepening of trade negotiations, the RMB rose rapidly, and has risen by more than 2% so far.

Increase reverse cyclical regulation and reduce risk premium

According to Yi Gang, the future framework is more clear and spanparent, that is, large banks are the first and medium-sized banks are the second gear, and small banks, especially the rural credit cooperatives and farmers' business in the county level, are the lowest. At present, the official reserve requirement rate of the third tier reserve ratio is 11%, the excess reserve ratio is around 1%, and the total reserve requirement rate is about 12%.

"From an international comparison, our deposit reserve ratio is moderate in international comparison," he said. Developing countries have problems of development stage. At this stage, a certain statutory reserve requirement ratio is appropriate and necessary. At the same time, we should consider the optimal allocation of resources and prevent risks.

At the same time, Yi Gang gives the official definition of "moderate tightness". Prudent monetary policy should reflect the adjustment of the counter cyclical policy. Meanwhile, monetary policy should be tightened moderately. This year's tightness and moderation means that the growth rate of broad money (M2) and social financing scale should be consistent with the growth rate of nominal GDP in general.

In 2019, the government's work report mentioned that timely use of the deposit reserve ratio, interest rate and quantity and price means to guide financial institutions to expand credit delivery and reduce loan costs, accurately and effectively support the real economy, and can not make capital idle or real.

In order to reduce the real interest rate, he explained that it mainly refers to the high financing cost of small and micro enterprises and private enterprises. In the loan interest rate, the risk premium is mainly caused by the high risk premium, except the risk free interest rate.

"Looking at the orientation of monetary policy last year, in fact, we have been reducing risk free interest rates." He said, and reducing the risk premium is mainly market-oriented interest rate reform, and supply side structural reform two ways.

The rate of return on China's 10 year treasury bonds, which has been regarded as risk-free interest rate benchmark, has reached 77 basis points since the beginning of last year. During the same period, the 7 day mortgage repo weighted average interest rate of interbank liquidity dropped by about 47 basis points. However, private enterprises are still facing the problem of financing difficulties. This is the last year since the 4 quarter of last year, China has gone from the top leader Xi Jinping to officials at all levels. It has continuously voicing support for the development of private enterprises, and has introduced various policy bail outs. The central bank has set up a support tool for private enterprise bond financing, and many enterprises have issued credit risk mitigation tools. At the end of the year, the central bank created TMLF again, and the first operation has been carried out in the first quarter. The central bank has further relaxed the threshold of targeted reduction, and in January, a comprehensive drop of 1 percentage points, two times to implement.

Will have more confidence in RMB

For the RMB exchange rate, Yi Gang believes that the market decides the exchange rate, which occupies an increasing proportion in the whole exchange rate formation mechanism. The market construction and the general situation of China's opening will make the RMB exchange rate further move towards the direction of the market determined reform, and with the increase and perfection of market tools, people's expectations are becoming more and more stable.

"If we look forward to the future this year, the RMB exchange rate will become a very attractive and freely available currency under the market determined mechanism. Chinese people, Chinese enterprises and investors all over the world will have more confidence in RMB." He said.

Over the past two years, China's exchange rate target once again mentioned the perfect exchange rate formation mechanism; Premier Li Keqiang said in his 2019 government work report that the exchange rate formation mechanism will be improved this year to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

The central bank emphasizes that it will never use exchange rates for competition purposes, nor will it increase China's exports with exchange rates or consider trade frictions.

In order to maintain exchange rate stability and whether it will affect monetary policy, Yi Gang frankly thinks that monetary policy should be mainly domestic, for example, the deposit reserve ratio and the high interest rate are all based on the domestic economic situation and development trend. The exchange rate should not play an important role in domestic considerations.

China's balance of payments structure, vice president of the central bank and Pan Gongsheng, director of the State Administration of foreign exchange, also mentioned that in future, China's current account will remain at a reasonable level with a reasonable balance. The trade deficit will gradually become stable, and the trade in goods will have strong international competitiveness. In terms of capital account, China still has great potential to attract foreign direct investment. In addition, with the further opening of the financial market, China's stock market and bond market will be brought into the main international index, which will increase very rapidly in the next few years.

"A comprehensive analysis shows that the structure of China's revenue and expenditure will still present a basic balance in the future," Pan Gongsheng said. It also said that the people's Bank of China and the foreign exchange bureau will continue to push forward the reform of the exchange rate formation mechanism, maintain the flexibility of RMB exchange rate and give full play to the role of the RMB exchange rate in regulating the balance of payments.

The default level of bond market is not high.

In 2018, the credit default market in China continued to contract thunderstorms, but it seemed that pan was not too worried about the issue.

"By the end of last year, the ratio of default in China's bond market accounted for 0.79% of the total market. As we all know, the proportion of non-performing loans is 1.89%. Internationally, Moodie has also released the default level of the international bond market in the past few years, and the number it issued is between 1.12-2.15. He compares the data, saying that the overall level of default in China's bond market is not very high.

He also said that in 2019, in accordance with the principles of marketization and rule of law, we should control the default intensity of the bond market and improve the disposal system of the default bond disposal market and the default bonds.

In 2018, China's offshore bond market default bonds reached a record high of 120 billion yuan, and the credit risk continued to accelerate in 2019. The latest data show that the principal amount of default bonds has amounted to 14 billion 700 million yuan so far, 3 times higher than that of the same period last year, and another 162 billion 960 million yuan credit debt is under pressure.

Another hot topic this year is the "opening up" of the bond market. Bloomberg has issued a notice that the renminbi and Chinese policy bonds will be included in the Bloomberg Barclays global composite index from April. The Morgan Stanley research report predicts that this year's treasury bonds will be included in the widely followed bond index or attract about 80 billion US dollars in capital inflows.

Pan Gongsheng said in a press conference that China's bond market is generally open to the outside world as a whole, but its overall level is not high and its potential in the future is still relatively large. In the next step, we must continue to promote the opening of the bond market steadily and create a more convenient and favorable market environment for foreign investors to invest and trade Chinese bonds.

With the opening up of China's bond market, the proportion of foreign investment in China's treasury bond market is gradually improving. According to the data of China's debt, the volume of Chinese bonds held by foreign institutions by the end of February is over 1 trillion and 500 billion yuan, accounting for 2.7% of the total number of bonds in the interbank bond market managed by the agency.