Chinanews.com, March 9th: Why did the "Father of Quantitative Easing" like the People's Bank of China?
Country is a direct train author Chen Kangliang
The newly released government work report shows that in 2022, my country's GDP (gross domestic product) will grow by 3.0% year-on-year, and the total economic volume will exceed 121 trillion yuan (RMB, the same below); CPI (consumer price index) will rise by 2% year-on-year, This is significantly lower than the growth rate of developed economies such as the United States (8.0%), the Eurozone (8.4%), and the United Kingdom (9.1%).
People's Bank of China.
(Data map) Photo by China News Agency reporter Zhang Xinglong
Considering the impact of multiple unexpected factors last year, this achievement did not come easily.
High-quality economic development and price stability cannot be separated from the support of a sound monetary policy.
According to Richard Werner, a professor at Oxford University and the earliest proposer of the academic concept of quantitative easing (QE), Western central banks should learn from the Chinese central bank how to do a good job in terms of boosting the economy and stabilizing prices. .
China's central bank's "window guidance" is effective monetary policy
Regarding the relationship between monetary policy and economic stimulus, Richard Werner said in an interview with the media recently that economic growth depends on the creation of bank credit in the real economy, which the central bank can control.
Government fiscal policy is less important than central bank policy in generating bank credit creation.
For central banks, their goal should be to create sustainable, high and stable, non-inflationary, crisis-free economic growth.
Central banks in Europe, North America, and Japan mostly went in the opposite direction, with unsustainable, inefficient, and unstable economic growth accompanied by inflation and financial crises.
"Now, Western central banks should learn how to do their jobs well from the PBOC, which recognizes that the economy is driven by bank credit creation," said Richard Werner.
In Richard Werner's view, if bank credit is created for consumption, consumer prices will rise.
Asset inflation occurs when bank credit creation is primarily used for asset purchases, such as buying apartments and real estate.
Neither is sustainable.
In contrast, the central bank should ensure that bank credit creation is used for productive business investment, mainly to increase productivity or generate new goods and services, providing a value higher than the input cost.
This will lead to high-speed, stable, sustainable growth without asset inflation or consumer price increases, and without crises.
So, how can we effectively guide the flow of credit?
Richard Werner believes that the "window guidance" implemented by the People's Bank of China is the most effective way to implement monetary policy.
The so-called window guidance means that the central bank guides the increase or decrease of commercial bank loans according to the industrial market, price trends, financial market trends, and monetary policy requirements, so as to ensure the funding needs of the economic priority development sectors.
It is a supplementary tool created by the central bank to avoid market mechanism failure.
However, in the context of Richard Werner, window guidance clearly has a broader meaning, that is, the guidance of the central bank on the flow of credit.
As Richard Werner argues, window guidance is a tool for monitoring, coordinating credit creation by banks as a whole and sectorally, and ensuring that this money created by extending credit is used only for the public good.
In terms of guiding the flow of credit to key areas and weak links, my country's central bank has introduced moderate structural monetary policies in recent years.
The so-called structural monetary policy tool is a tool used by the central bank to guide the credit investment of financial institutions and play the role of precise drip irrigation and leverage. Reduce corporate financing costs.
The support focuses on two aspects: one is to support small and micro enterprises and the private economy; the other is to support green finance.
Among them, in 2022, the balance of inclusive small and micro loans will be close to 24 trillion yuan, and the number of credit customers will exceed 56 million.
"This (window guidance) is not tyrannical, because banks can freely choose whom to lend in the window-guided industrial sector." Richard Werner said that at the same time, this credit guidance policy is also reasonable because bank credit Creation affects everyone and is a public good.
Therefore, there should be a coordinator to ensure that such public goods are only used in reasonable circumstances.
Richard Werner said that relaxing the amount of credit to the real economy, mainly in the form of bank credit for small and medium-sized enterprise business investment, is the right way to promote the real economy.
This would be a more equitable increase if the banks were lending primarily to small companies.
In general, big banks are reluctant to deal with small companies.
But small firms account for two-thirds of all employment in society, and they are important to a healthy economy.
Look back at Japanese monetary policy in the 1980s, when the Bank of Japan used window guidance to force banks to increase bank credit primarily for asset purchases, creating one of the largest housing and real estate bubbles in history.
This year's structural monetary policy "who advances and who retreats"?
This year's government work report pointed out that a prudent monetary policy must be precise and powerful.
Maintain the growth rate of broad money supply and social financing scale to basically match the nominal economic growth rate, and support the development of the real economy.
Regarding the next step of monetary policy thinking, Yi Gang, governor of the central bank, said a few days ago that, on the one hand, the total amount of money and credit should be moderate, the pace should be stable, and the achievements of the decline in real loan interest rates should be consolidated.
On the other hand, the role of structural monetary policy should be brought into play appropriately, and strong support should be maintained for inclusive small and micro enterprises, green finance, technological innovation and other fields.
Liu Guoqiang, deputy governor of the central bank, said that the central bank will continue to evaluate structural monetary policy tools, do a good job in classified management, and achieve progress and retreat. For some key areas and weak links that need long-term support, structural monetary policy will give more Long-term and continuous support; for some tools with obvious phased characteristics, it is necessary to withdraw in time. Of course, when withdrawing, we must also pay attention to "slow decline" and do not make sharp turns.
Lian Ping, Chief Economist and Director of Zhixin Investment Research Institute, said that the central bank has clearly proposed to do a good job in the evaluation and classification management of structural tools, so that there will be advances and retreats.
It is expected that in the future, refinancing for transportation, logistics and warehousing industries, and special refinancing for equipment renovation and transformation, and other tools with obvious phased characteristics may be gradually withdrawn.
In addition, tools such as carbon emission reduction support tools, inclusive small and micro loan support tools, and technological innovation refinancing may provide long-term and stable financial support to green industries, technological innovation, and inclusive finance.
It is also worth noting that the central bank recently released the "China Monetary Policy Implementation Report for the Fourth Quarter of 2022", which proposed in the "Main Policy Ideas for the Next Stage" to "play the incentive and guiding role of structural monetary policy tools".
Mingming, the chief economist of CITIC Securities, believes that the "Report" also added the expression "promoting a strong recovery of consumption and enhancing the potential of economic growth" in the deployment of structural monetary policy tools. It is expected that the subsequent central bank will use structural tools to stimulate consumption Driven by demand, there may be incremental structural tools to promote consumption.
Zhang Yu, chief macro analyst at Huachuang Securities Research Institute, said that looking ahead, structural monetary policy tools are still the top priority.
First of all, various monetary policy tools in the early stage are expected to be further strengthened; secondly, inclusive small and micro loan interest rate reduction support tools, toll road loan support tools, private enterprise bond financing support tools and guaranteed delivery building loan support plans will also play a greater role ;Finally, policy development financial instruments may rise to the trillion yuan level in 2023, further supporting infrastructure construction and mobilizing effective investment.
Wang Qing, chief macro analyst at Oriental Jincheng, said that the tone of this year's monetary policy is "precise and powerful". In addition to the implied total amount, it also includes that structural monetary policy tools will play a key role in 2023.