PBoC Officials See Stable Markets, Slower Deleveraging

iFeng: 重磅!央行对最近最关注的几个问题进行了明示或暗示回应
Banking system is reasonably stable

The relevant person in charge of the central bank stated that overall, a stable and neutral monetary policy has achieved good results, the banking system has a reasonable and stable liquidity, the scale of money and credit and social financing has grown moderately, the market interest rate has remained basically stable, and the overall social financing costs have remained stable. With the decline, financial support for the real economy has been relatively stable. It has played an important role in serving the real economy and preventing and controlling financial risks.

What are the performances? The data released by the Central Bank last week explained everything:

According to the above-mentioned person in charge, from the perspective of M2 and credit growth, at the end of May 2018, M2 increased by 8.3% year-on-year, the growth rate was 0.2% higher than that at the end of 2017, and the entity's liquidity as a whole stabilized. In May, renminbi loans increased by 1.15 trillion yuan, an increase of 40.5 billion yuan year-on-year, and loans for small-scale and agriculture-related sectors accelerated.

From the perspective of the growth of social financing, the increase from January to May was 7.9 trillion yuan, a year-on-year decrease of 1.44 trillion yuan, mainly due to the strong regulatory and deleveraging policy effects, entrusted loans, trust loans, undiscounted bank acceptance bills, etc. Off-balance-sheet financing has declined, and bond market financing has decreased.

"Comprehensively considering seasonal fluctuations, asset securitization and other factors, the overall growth of social financing this year has been relatively stable," said the responsible person. At the same time, he pointed out that, in general, it is necessary to grasp the rhythm and strength, reduce the idling of funds, and steadily and orderly go to leverage.

At the same time, the financial market interest rate has stabilized. According to the above-mentioned person in charge, at present, the yield on 10-year Treasury bonds has fallen from nearly 4% at the end of last year to around 3.6%.

In May 2018, the weighted average interest rate of inter-bank borrowing and the weighted average interest rate of pledged repurchase were 2.72% and 2.82%, which were 0.16 and 0.11 percentage points lower than the same period of the previous year respectively. Since the beginning of the year, they have declined by 0.20 and 0.29 percentage points respectively.
Risk in the bond market is contained.
Debt market risk control!

For the bond market, the above-mentioned person in charge of the central bank pointed out that the bond market risk is generally controllable.

Since the beginning of this year, the bond issuance and financing has seen a year-on-year rebound, and the market interest rate level has shown a downward trend overall. Despite some material breaches, the recent new violations have been distributed in a punctiform manner, showing no risk concentration, and strengthening market discipline. Order to break the embodiment of rigid payment, the overall level of bond default rate is not high.

As of the end of May 2018, the unpaid amount of corporate credit bonds after default was RMB 66.3 billion, accounting for 0.39% of the balance.

Moreover, behind the bond market is a strong support for the entire Chinese economy. The above-mentioned person in charge stated that China's current economic fundamentals are good, the resilience of economic growth has increased, the production indicators have been stable, the total supply and demand have become more balanced, and the growth momentum has been accelerated.

In 2018, China's economic operation will remain in a reasonable range. China's economic potential is great and its resilience is strong. It will maintain a steady and healthy growth in the medium to long-term good trend.
What to do next?

The above-mentioned person in charge of the central bank introduced the issue, paid close attention to the international and domestic economic and financial trends, implemented a stable and neutral monetary policy, strengthened the pre-judgment and pre-adjustment of fine-tuning of the situation, strengthened the coordination of regulatory policies, grasped the strength and rhythm of the policy, and increased the The economic support of entities such as enterprises, improvement of the two-pillar regulatory framework of monetary policy and macro-prudential policies, actively and effectively responding to possible external shocks, stabilizing market expectations, maintaining the smooth operation of the financial market, orderly advancing financial reform and opening up, and promoting stable and healthy economic and financial development .

It is worth noting that "actively responding to possible external shocks" is a new expression . In fact, along with the increasingly complex international economic and financial situation, the macro-control departments have become increasingly meticulous and professional in their observation, research, and monitoring of the external environment.

The responsible person revealed that the PBC has established an international financial risk tracking group, paying close attention to changes in the international and domestic economic and financial situation, and guiding and stabilizing market expectations.
How strong is the economy? A different PBoC official says "deleveeraging" will slow down, aka China's debt-to-GDDP ratio will expand more quickly.
The marginal force of deleveraging should gradually slow down

Sheng Songcheng, a counselor with the People's Bank of China and executive dean of the China-EU Lujiazui International Finance Research Institute, pointed out that financial deleveraging has led to a tighter financing environment, and now it is transmitted to the real economy. However, monetary policy should not be relaxed on this, or financial de-leverage may prevail.

"Of course, the marginality of deleveraging should gradually slow down. Compared with the previously tight monetary policy, the central bank can consider more camera choices and make monetary policy more stable and neutral. Targeted RRR, MLF, etc. can be used. Quantity and price tools to adjust." Sheng Songcheng pointed out.

In fact, this has already been reflected in the previous actions of the central bank to lower the standard and expand the scope of MLF collateral. The central bank announced on June 1 that it will appropriately expand the scope of MLF collateral. Newly incorporated categories include small and micro enterprises, green and “agricultural, rural, and peasant” financial bonds, AA+ and AA grade corporate credit bonds of not less than AA grade, and high-quality small Micro-enterprise loans and green loans.

Sheng Songcheng stated that this move is intended to further increase support for small and micro enterprises and the green economy and other areas. In combination with the recent increase in credit events of private enterprises, it is more structural adjustments in the deleveraging process, and the actual effects are also Market liquidity has increased.

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