Who will benefit from the central bank’s first RRR cut of 1 trillion yuan in real money this year?

Today, the first reserve requirement ratio reduction in 2024 officially comes into effect!

The People's Bank of China (hereinafter referred to as the "Central Bank") announced on January 24 that it will lower the deposit reserve ratio of financial institutions by 0.5 percentage points starting from February 5, 2024 (excluding financial institutions that have implemented a 5% deposit reserve ratio) , after this reduction, the weighted average deposit reserve ratio of financial institutions will be approximately 7.0%.

The intensity of this reduction is far greater than that of the past two years. There will be two comprehensive RRR cuts in 2022 and 2023, but the magnitude will be 0.25 percentage points. This RRR cut will reach 0.5 percentage points, providing the market with long-term liquidity of 1 trillion yuan.

Chen Li, chief economist of Sichuan Finance Securities, told a reporter from Securities Daily that the substantial RRR cut at the beginning of this year further releases a signal of stabilizing growth, which is helpful in boosting the confidence of market entities, helping to stabilize the housing market, stimulating the vitality of the real economy, and stabilizing the capital market. Significance.

“From the perspective of financial services to the real economy, RRR cuts can provide commercial banks with long-term, low-cost liquidity, which will help increase their enthusiasm for credit and guide more funds to flow to technological innovation, advanced manufacturing, and green development, small, medium and micro enterprises and other key areas and weak links of the national economy, to help the high-quality development of the real economy." Chen Li said.

Zhongtai Securities research report believes that this RRR cut releases a positive signal of stabilizing growth policies, creates space for banks to further reduce social financing costs, and transfers profits to the real economy, which will have a greater positive effect on economic operations throughout the year. In the short term, the central bank's announcement of a reduction in required reserve ratio releases a positive policy signal, which will have a certain boost to the capital market, and will help smooth the Spring Festival funding situation, fill the funding gap, and help banks get off to a good start.

Central Bank Governor Pan Gongsheng recently said, “In 2024, the spillover effects of monetary policies in developed economies will develop in a direction of reducing pressure, and the cyclical differences between China and the United States’ monetary policies are converging. Such a change in the external environment will objectively help strengthen China’s The autonomy of monetary policy operations will expand the space for monetary policy operations.”

This means that the constraints of the external environment on my country's monetary policy have been significantly weakened, making it more conducive for my country's monetary policy to "focus on me." After the RRR cut is implemented, what other monetary policy tools are worth looking forward to?

The central bank website released news on February 1 that in January, the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China issued a net new mortgage supplementary loan (PSL) of 150 billion yuan. The balance of mortgage supplementary loans at the end of the period was 3,402.2 billion yuan.

This is the second consecutive month of net new PSL growth following the net new increase in mortgage supplementary loans in December 2023, with the cumulative total in two months reaching 500 billion yuan. PSL is a structural monetary policy tool. It was created by the central bank in April 2014. Its main function is to support the development of key areas, weak links and social undertakings of the national economy and provide large-scale financing with a long term to financial institutions. PSL is issued in the form of pledge, and eligible collateral includes high-grade bond assets and high-quality credit assets.

After the central bank "announced" the RRR cut, many analysts believed that attention should be paid to the use of structural monetary policy tools in the future. Especially with the advancement of the "three major projects", structural monetary policy tools such as PSL are expected to be further used to stimulate credit expansion, promote the formation of physical workload, and help stabilize investment and growth.

There are also market views that interest rate cuts are still possible after the RRR cut.

Wen Bin, chief economist of China Minsheng Bank, said that with the combined force of RRR cuts releasing trillions of yuan in liquidity, targeted interest rate cuts, and earlier deposit interest rate cuts, the probability of a LPR (loan market quotation rate) cut in February has increased, pushing Financing costs have declined steadily. In the stage of bottoming out aggregate demand, the possibility of lowering the MLF (medium-term lending facility) interest rate due to counter-cyclical adjustments still exists, but there is still uncertainty about whether to lower it in February.

"In the past few months, the central bank has not lowered the MLF interest rate and LPR. There are two main considerations: first, the interest spreads of commercial banks continue to decline, and second, the global interest rate level is at a high level. In the second quarter, U.S. monetary policy may enter an interest rate cutting cycle, and domestic monetary policy The room for easing will increase." Bian Quanshui, chief macro analyst of Western Securities, said in an interview with a reporter from Securities Daily that the current inflation growth rate is still negative and the real interest rate is at a high level. The central bank may cut interest rates again in 2024, but when the interest rate is cut, The point may be further back.