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China Monetary Policy Report Fourth Quarter 2023: Emphasizing Clear Policy Coordination and “Matching” Financing Markets

The “matching” of monetary policy is expressed more clearly and emphasizes grasping the relationship between the two largest financing markets.

On February 8, the People’s Bank of China released the “China Monetary Policy Implementation Report for the Fourth Quarter of 2023” (hereinafter referred to as the “Report”). Based on a systematic review of policies and results over the past year and a comprehensive analysis of the current economic and financial situation, it explains Policy orientation and focus in the next stage. Industry insiders said that the report released a positive signal and that the People’s Bank of China is still expected to maintain strong policy support for economic recovery in the future.

Talking about the main ideas of monetary policy in the next stage, the report pointed out that prudent monetary policy must be flexible, moderate, precise and effective. Reasonably grasp the relationship between the two largest financing markets, bonds and credit, accurately grasp the laws and new characteristics of money and credit supply and demand, guide the reasonable growth and balanced release of credit, maintain reasonable and sufficient liquidity, and keep the scale of social financing and money supply in line with economic growth and prices. level to match expected goals. Strengthen policy coordination and cooperation to effectively support the promotion of consumption, stabilize investment, expand domestic demand, and keep prices at reasonable levels. We will continue to deepen the market-based reform of interest rates, further improve the loan market quotation rate formation mechanism, give full play to the role of the market-based adjustment mechanism for deposit interest rates, and promote the stability and decline of comprehensive social financing costs. Give full play to the dual functions of the total volume and structure of monetary policy tools. Support the adoption of debt restructuring and other methods to revitalize the credit stock and improve the efficiency of the use of existing loans.

Analysts in the industry believe that the report emphasizes “maintaining the scale of social financing and money supply to match the expected goals of economic growth and price levels”, compared with the previous “maintaining the growth rate of money supply and social financing scale to basically match the nominal economic growth rate” , this statement clearly reflects both economic growth and price levels, and also takes into account expected factors, which is conducive to coordinating both economic and price goals. The matching anchor is clearer and can better guide and stabilize expectations.

This person believes that the connotation of “matching” can be reasonably grasped from three perspectives. One is that “match” does not mean “exactly equal”. The scale of social financing and the growth rate of M2 depend on the macro situation and regulatory needs. When the economic momentum weakens, it is appropriately higher than the nominal economic growth rate. When the economy overheats, the gap narrows or even becomes lower. This is the need for countercyclical adjustment. Second, “matching” needs to be viewed over a long period of time and across cycles. Matching is a mid- to long-term concept and does not need to be matched every quarter or even every month. In the past two years, financial data has continued to lead economic data. In the future, as the macroeconomic recovery improves, the gap between economic and financial growth is expected to gradually close. The third is to judge the intensity of financial support more based on the cumulative increase in loans. The increment in individual months is easily disturbed by multiple factors such as base, seasonal patterns, assessment and supervision, etc. The cumulative increment can more objectively and comprehensively reflect the strength of support over a period of time.

It is worth noting that the report also released a signal that the focus of major financial aggregate indicators has changed. Industry insiders said that the report emphasized the need to maintain reasonable growth in financing and monetary aggregates, and to reasonably grasp the relationship between the two largest financing markets, bonds and credit. These all indicate that the extent to which finance meets the financing needs of the real economy must be viewed from a broader perspective. Financing support is not limited to credit. Compared with indirect financing, direct financing channels such as bonds are actually more efficient. Both also reflect the support of the financial system to the real sector. Financial support needs to be viewed together. Moreover, under the guidance of enhancing the consistency of macro policy orientations, the effects of current fiscal, industrial and other macro policies will be reflected in government bonds, corporate bonds, equity and other financing, and the development of direct financing is also more suitable for technological innovation, new drivers, etc. , producing a healthy substitute for the demand for money and credit, and the combined inspection is also conducive to avoiding misunderstandings of monetary and financial conditions. (Reporter Zhang Mo)

2024-02-09 02:17:52
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