PBoC: No Better Way To Stabilize Markets

iFeng: 央行:为稳定市场放水属无奈 没有更好办法
Sixth, to take timely measures to maintain financial market stability, to avoid the outbreak of systemic financial risk. Since the mid-2015, China's capital market appears twice rapid decline. The first is the stock market fell sharply after mid-June, in order to prevent the outbreak of systemic financial risks, the People's Bank to take timely measures to cut interest rates and provide liquidity support, in June and July M2 growth rate jumped one and 1.5 percentage points. The second time was in January this year, the Shanghai and Shenzhen stock index fell sharply again 25-30%, in order to prevent panic, promote market stability and to increase liquidity put in, but also so that the M2 growth rate has accelerated to a certain extent. From a global point of view, passively injecting liquidity to stabilize the market proves to be without choice, but it seems there is no better way. Like former Federal Reserve Chairman Alan Greenspan said, monetary policy is difficult to accurately determine the asset bubble before, is nothing more than after the fact to provide some liquidity support from the financial stability point of view, in order to alleviate the economic consequences caused by the bubble burst.
The PBoC also says to watch the long-term M2 growth rate. Monetary emissions are short-term and create a high base, which causes the growth rate to fluctuate.
Accordingly, monetary and credit operation showed the following characteristics: First, the overall steady moderate growth of money and credit, there are some stages of rapid growth and seasonal fluctuations. In recent years we have been insisting neutral monetary policy steady and moderate, M2 and credit growth and no major mutations, M2 growth the past five years at around 13%, with an average of 13.3% this year, M2 target is 13% so, still robust arrangements. Before and after July 2015 and the first quarter of this year, credit growth has accelerated, mainly the monetary policy appropriately consider the counter-cyclical macro-control and financial stability. A quarter, particularly in January faster growth of money and credit, the Chinese New Year holidays and disturbance characteristics have a great relationship. Monthly monetary and credit data some fluctuations are normal, observe monetary policy soundness not just look at individual months, need to see months and a year on average, the overall situation in order to determine. With the elimination of the Spring Festival and the stock market gradually stabilized, monetary and credit growth will eventually come back. From the look in recent months, there have been gradual stabilization of the monetary and credit situation, April M2 growth of 12.8%, has dropped 1.2 percentage points from January, from January to April loans added 5.16 trillion yuan, up by more than by 777.9 billion yuan, are relatively normal. It should be noted that, due to respond to stock market volatility at the time of last year to make a substantial raise M2 base, so the next few months M2 growth may also have more significant decline, of course, this is also the main base year data interference effect, does not represent the real growth rate, with the gradual disappearance of the base effect, M2 growth will return to normal. Second, interest rates low for the financing costs decreased significantly. In April 2016, inter-bank borrowing and bond repurchase weighted average interest rate were 2.11%, down 1.38 percentage points from the end of 2014. In March 2016, non-financial companies and other sector loans weighted average interest rate was 5.30 percent, down 1.47 percentage points from the end of 2014.
Here's rolling 3-month M2, showing it is consistently inconsistent.

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