One or Two More RRR Cuts in 2018

21st Century Herald: 央行再次创新性定向降准，年内或仍有1-2次降准

In addition, there is still a general view that there are still downgrade operations in the future. Wen Bin, chief researcher of Minsheng Bank, said that there is still room and direction for the directional downgrade in the next phase, and there may still be 1-2 directional downsizing operations by the end of the year.

There are still 1-2 drops in the year or
Along with this orientation, the orientation of monetary policy has been discussed. One of the discussions is whether monetary policy has been loosened.

This argument is not without a basis. First, the official expression of current liquidity has changed. On June 20, the executive meeting of the State Council stated that it was "reasonably adequate". Before that, it was "reasonable and stable," and earlier it was "basically stable." Secondly, from the perspective of the central bank’s operation, the current RRR cut is the third time in the year. In addition, MLF collateral can be expanded in May and the central bank overran MLF in June.

However, a number of respondents believe that the tone of a stable and neutral monetary policy has not changed, but changes in the structure and margins. Even Lian Ping said that last year was running in the tight direction of the DPRK, but now it is in the loose direction. “From the results, under strong supervision and de-leveraging, liquidity is not reasonable and moderate, but it is tight. If we do not adjust for biased direction, the actual state of monetary policy will be tight.”

"Monetary policy needs to make some adjustments according to the economic situation. Now that entity financing is relatively difficult, trade frictions are still heating up, and economic growth is facing greater downward pressure, so under the sound and neutral tone, it is necessary to fine tune monetary policy. Xu Gao said.

Wang Qing, deputy general manager of the Oriental Jincheng Research and Development Department, believes that during the year the central bank’s policy and rhythm will be fine-tuned by the camera, or it will continue to be reduced by 0.5-1.5 percentage points, which is equivalent to one or two reductions. “The future still needs to be reduced. Now under the strong regulatory environment, the off-balance-sheet transfers have more bank credit than banks’ capital funds. In this case, it is necessary to reduce the bank’s interest rate to allow banks to have more lending capacity.

This will weaken the yuan and indicates "strong" dollar, deflationary pressure remains a serious concern. None of these anticipated RRR cuts are easing, but instead designed to offset the tightening caused by the deleveraging efforts.

China's ace in the trade war isn't devaluation because it is a weapon against America, but because it is a tool for rebooting the Chinese economy and deleverages the economy in one fell swoop. Along with the trade war, it would force a rebalancing of China's economy.