Editor's note
Recently, the article "Sharply Reduce Interest Rates as Soon as Possible to Boost Investment, Property Market and Consumption" by the Chongyang Institute for Financial Studies of Renmin University of Chinese (Chongyang) has attracted widespread internal and external attention. On January 24, the People's Bank of China announced a targeted interest rate cut, lowering the relending and rediscount rates for small agricultural support by 0.25 percentage points. Since then, Professor Zhao Xijun of Chinese People's University, Chongyang Morning Meeting of the National People's Congress, Liu Zhiqin, Senior Researcher of Chongyang of the National People's Congress, and Luo Siyi, a British scholar, have conducted in-depth discussions on this. On January 27, Liu Ying, a researcher at the Chongyang Cooperative Research Department of the National People's Congress and director of the Cooperative Research Department, published a commentary article "Increasing Cross-Cyclical and Counter-cyclical Adjustment" in the 21st Century Business Herald. The full text of the article is published as follows:
▲This article was published in the 21st Century Business Herald Review Edition on January 29
The first RRR cut in the new year started the stock market rally, and after a day, the stock index climbed from 2770 points to 2906 points, which is the stock market performance since the governor of the central bank announced the RRR and interest rate cut at the State Council Information Office meeting. The central bank will cut the reserve requirement ratio by 0.5 percentage points on February 5 and the relending and rediscount rates for rural and small enterprises by 0.25 percentage points on January 25, from 2% to 1.75%. The RRR and interest rate cuts will promote a steady and moderate decline in the comprehensive financing cost of the society.
What is the background, timing, direction, intensity and effect of the RRR and interest rate cuts?
First of all, the first drop of the year is precise and powerful.
The purpose of the RRR cut is to reduce the financing cost of the real economy, promote investment and consumption, and then promote economic growth, which will help stabilize the market and boost confidence. This year, the United States and Europe will enter a cycle of interest rate cuts, with reduced external pressure, low internal prices, and room for RRR and interest rate cuts this year supported by the internal and external environment. At present, the mainland's statutory reserve ratio is 7.4%, and the RRR cut will release 1 trillion yuan, which is equivalent to the scale of last year.
The timing of the RRR cut is very critical, and it is also very important to the pulling role and strength of the economy. In particular, large projects are pre-arranged funds, construction at the beginning of the year, in addition to the beginning of the spring ploughing, before the Spring Festival wages, there are more concentrated financing needs, so the first drop in the beginning of the year, help to protect the investment and financing needs of enterprises, and boost the confidence of investors and consumers, and promote the rapid economic growth track.
Second, we should intensify cross-cyclical and counter-cyclical adjustments, and make a combination of policies to promote economic growth.
The cross-cyclical and counter-cyclical adjustment of the economy, the real estate property loan policy was launched on the same day, the scope of bank inclusive finance was increased from 10 million to 20 million, the credit market department was established to implement the five major articles, and the Qiantang credit information was opened to strengthen the construction of the personal credit system. It is necessary not only to reduce the reserve requirement ratio and reduce interest rates at the same time, but also to innovate monetary policy tools, not only to combine aggregate and structural monetary policies, but also to innovate monetary policy tools from quantitative to price-based monetary policy tools.
In addition to monetary policy, the SASAC proposed to explore the inclusion of market value management in the scope of assessment. We will combine monetary policy, fiscal policy, industrial policy, regional policy, and employment policy, and at the same time combine reform and structural adjustment to increase support for scientific and technological innovation, advanced manufacturing, green development, and small and micro enterprises, so as to boost and promote economic growth. It can be expected that the interest rate on re-lending and re-discounting loans to support agriculture and small enterprises will drop by 25 basis points, which is only a warm-up for a larger and more comprehensive interest rate cut this year. The RRR and interest rate cuts will help reduce the financing costs of enterprises and the consumption costs of consumers, stimulate investment, promote consumption, and then promote economic growth. Third, we will implement RRR and interest rate cuts, smooth the monetary transmission mechanism, and reduce actual financing costs. The purpose of speeding up the construction of a financial power is to provide financial services to the real economy, although the RRR and interest rate cuts can release funds, but whether banks lend to enterprises and whether the stock market can rise depends on the company's performance, and whether the company makes money essentially depends on whether the economy grows and whether the cake can be bigger. This requires fundamental reforms, straightening out the mechanism, allowing the transmission mechanism between financial institutions and the real economy to be unimpeded, and preventing funds from rotating within the financial system.
It is necessary to pay careful attention to the effect of RRR and interest rate cuts, and make both horizontal and vertical comparisons.
From a horizontal point of view, in order to rescue the market and promote growth, the unconventional monetary policies adopted by the United States, Europe and Japan in recent years have boosted the economy to a certain extent, the United States adopted a monetary policy of falling to zero interest rates and unlimited quantitative easing during the epidemic, until last year's high inflation raised interest rates to 5.5%, while Europe has implemented eight years of negative interest rates in response to economic weakness, and has only recently raised interest rates ten times to more than 4%, and Japan is the initiator of unconventional monetary policy, and is still implementing yield curve control.
From a longitudinal point of view, the current international and domestic economic situation is completely different from the background when the 4 trillion yuan was launched in 2008. From the perspective of policy restrictions, the current marginal limit of rapid and sharp interest rate cuts is decreasing, on the one hand, the interest rate spread limit of banks, reducing the cost of bank liabilities to lay the foundation for the decline of asset costs. Mainland commercial banks rely on interest rate spreads as their main source of profits, but at the end of last year, major banks lowered their deposit interest rates, and they can also adopt measures to obtain quasi-interest income, including the sale of government bonds to residents, in preparation for an all-round interest rate cut. As a result, it is necessary to further open up the treasury bond market to the household sector, which in turn will guide the real deposit rate downward in preparation for an across-the-board interest rate cut. On the other hand, the exchange rate stability is restricted, and the United States and Europe have entered a cycle of interest rate cuts, which has reduced the external pressure on the mainland to cut interest rates and reserve requirements regardless of the timing of interest rate cuts. In fact, U.S. economic indicators fell further in the fourth quarter, with the Fed likely to cut rates by 125 basis points this year instead of the 75 basis points on the dot plot. It remains to be seen whether the U.S. election will deform U.S. monetary policy.
From the perspective of policy operation, the 4 trillion yuan in 2008 was mainly solved from the perspective of finance, not only from the monetary policy. In addition, China's economy was not yet the second largest economy at that time, and the current size of China's economy and the external economic environment are not the same as in 2008.
From the perspective of policy effects, this year's RRR and interest rate cuts are completely different from those in 2008 in the face of a century-old epidemic and superimposed changes in a century, and the impact of China's own structural adjustment on China's economy is completely different from that in 2008. Now that China's economy has changed from export-oriented to domestic demand-driven, the RRR and interest rate cuts will help mobilize the enthusiasm of all market players and drive the inflow of funds into the stock market and the housing market. In the future, RRR and interest rate cuts can be expected, and they need to be precise and powerful, in addition to reducing long-term monetary policy tools, but also expanding to a variety of temporary monetary policy tools. For example, the monetary policy support tool for guaranteeing the delivery of real estate can be considered to be increased from the current 200 billion to 1 trillion to solve the current urgent real estate problem. To achieve high-quality economic development, it is also necessary to implement comprehensive policies, promote in-depth reform and expand opening up, and combine a more effective market with a promising government. We will delegate more power and make profits, improve the rule of law environment, and build a rule of law in China. It is necessary to speed up the construction of a unified national market, break down local protectionism, break down all kinds of barriers, and let China's economic cycle run unimpeded.
Chongyang, the National People's Congress
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RDCY
Established on January 19, 2013, Chongyang Institute for Financial Studies of Chinese University of China (Renmin University Chongyang) is the main funding project donated by Chongyang Investment to Chinese University and set up an education fund for operation.
As a new type of think tank with Chinese characteristics, Chongyang has hired dozens of former politicians, bankers, and well-known scholars from around the world as senior researchers, aiming to pay attention to reality, advise the country, and serve the people. At present, the Chongyang National People's Congress has 7 departments and 4 operation and management centers (the Center for Ecological Finance, the Center for Global Governance, the Center for China-US People-to-People Exchange, and the China-Russia Center for People-to-People Exchange). In recent years, the Chongyang National People's Congress has been highly recognized at home and abroad in the fields of financial development, global governance, major-country relations, and macroeconomic policy.
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