Zhongxin Net, 3 March (Reporter Li Jinlei and Gong Hongyu) The reduction of the reserve requirement has arrived.

For the first time this year, the RRR was cut by 0.25 percentage points across the board

People's Bank of China decided to reduce the RRR of financial institutions by 2023.3 percentage points on March 27, 0 (excluding financial institutions that have implemented a 25% RRR). After this reduction, the weighted average reserve requirement ratio of financial institutions is about 5.7%.

This is the first full RRR reduction in 2023.

The so-called RRR reduction, that is, the reduction of the deposit reserve ratio, deposit reserve refers to the funds prepared by financial institutions to ensure that customers withdraw deposits and fund settlement needs, and the proportion of deposit reserves paid by financial institutions to the central bank to their total deposits is the deposit reserve ratio. After the RRR cut, it means that the amount of money locked by commercial banks by the central bank according to law has decreased, and the money that can be used freely has increased accordingly.

Dong Ximiao, chief researcher of CMF Finance, told Zhongxin Finance that it is expected that the RRR reduction will release about 5500 billion yuan of medium and long-term liquidity to the banking system, reducing the cost of bank capital by about 70 billion yuan per year.

Infographic: People's Bank of China. Photo by Zhang Xinglong, reporter of China News Agency

Unexpected and expected

The RRR cut came as a surprise to many.

Dong Ximiao believes that this RRR reduction is both unexpected and expected. This RRR cut exceeded expectations, but it was necessary. In the short term, RMB loans grew rapidly in January and February, and the demand for the banking system to supplement medium- and long-term liquidity increased significantly. In the first two months, although the growth of corporate loans was good, the growth of household loans was weak, demand was still insufficient, and it was timely for monetary policy to increase its implementation.

Wen Bin, chief economist of China Minsheng Bank, told China News Finance that the current risks in the overseas banking industry are increasing, global liquidity is under pressure, and the external development environment is becoming increasingly complex. In the first two months of this year, the main economic indicators showed a positive trend, but the overall recovery foundation is not yet stable, and monetary, fiscal and other policies need to continue to make concerted efforts.

RRR cut seen as a "timely rain"

– Boosting confidence and supporting the high-quality development of the real economy

According to data from the National Bureau of Statistics, economic operation showed a trend of stabilization and recovery from January to February. However, the external environment has become more complex, the lack of demand is still prominent, and the foundation for economic recovery is not yet solid.

"Therefore, in order to better guide financial institutions to increase support for the real economy, alleviate the pressure of banks lacking long money since the beginning of the year, cooperate with fiscal front-loading efforts, and stabilize market expectations, the central bank continues to release medium and long-term liquidity and boost confidence through RRR reduction while increasing the excess renewal of MLF, so as to consolidate the economic stabilization and upward trend and the smooth operation of the banking industry." Wen Bin analysis.

Dong Ximiao pointed out that the RRR reduction is conducive to reducing the capital cost of financial institutions, enhancing the sustainability of financial institutions' concessions to the real economy and reducing the comprehensive cost of financing. At the same time, it will send clear policy signals to guide financial institutions to better help stabilize growth, expand domestic demand, and further stabilize market confidence and expectations.

Infographic. Photo by Wei Liang, reporter of China News Agency

——Positive impact, conducive to the stable development of the property market and stock market

Li Daxiao, chief economist of Yingda Securities, said that the RRR reduction is in line with expectations in the direction and exceeded expectations in the timing of its introduction, and the RRR reduction plays an important role in stabilizing the real estate market, promoting economic growth and stabilizing the stock market, and is a "timely rain" for the real economy, especially for enterprises in urgent need of funds.

Zhang Dawei, chief analyst of Centaline Real Estate, told Zhongxin Finance that under the goal of stable growth, monetary policy will continue to provide relatively sufficient liquidity support for the recovery and development of the real economy, and the RRR reduction will release medium and long-term liquidity, which is good for real estate. At present, the core problem of the real estate market is the problem of confidence, and the RRR reduction has a relatively large effect on easing credit and stabilizing confidence.

Dong Ximiao analyzed that after the implementation of the RRR reduction, the cost of funds for banks has been reduced, and the motivation of banks to reduce the increase in points has been enhanced, and it is expected that LPR (loan market quotation rate), especially LPR with a maturity of more than 5 years, is expected to decline this month or next month. This will help reduce the interest rate of stock and new housing loans, reduce the burden of residential housing consumption, and help the stable and healthy development of the real estate market.

Will the RRR be lowered in the future?

Yi Gang, governor of the People's Bank of China, pointed out at a press conference in early March that in the past five years, through 3 RRR cuts, the statutory reserve ratio of less than 14% is not as high as in the past, but the use of RRR reductions to provide long-term liquidity and support the real economy, comprehensive consideration is still a relatively effective way, so that the entire liquidity at a reasonable and sufficient level.

The central bank said at the time of the RRR reduction that it will accurately and effectively implement prudent monetary policy, better play the dual functions of the total amount and structure of monetary policy tools, maintain a moderate and stable pace of monetary credit, maintain reasonable and sufficient liquidity, keep the growth rate of money supply and social financing scale basically match the growth rate of nominal economy, better support key areas and weak links, do not engage in flood irrigation, take into account internal and external balance, and strive to promote high-quality economic development.

Dong Ximiao believes that although China's monetary policy has increased its support for the real economy in recent years, it has maintained a steady tone, and has not overissued currency, and has not implemented loose measures such as flood irrigation. Moreover, China's price level has remained basically stable, and the CPI rose only 2% year-on-year in February, and the inflation situation is moderate and controllable, and the future inflation pressure is not large. After this RRR reduction, the weighted average deposit reserve ratio of China's financial institutions is 1.7%, so there is still some room for future RRR reductions. (End)