China News Service, January 24 (China News Palace Hongyu) What will be the price trend in 2024?

What factors support the RMB exchange rate?

How are interest rates adjusted?

The central bank responded and answered the question at a press conference held by the State Council Information Office on January 24.

  Press conference site

Lower the deposit reserve ratio by 0.5 percentage points

  "Currently, my country's monetary policy still has enough room." Pan Gongsheng, governor of the People's Bank of China, said at the press conference that the central bank will balance the short-term and long-term, stabilize growth and prevent risks, internal balance and external balance, and strengthen countercyclical and cross-cyclical adjustments to create a good monetary and financial environment for economic operations.

  On February 5, the People's Bank of China will lower the deposit reserve ratio by 0.5 percentage points and provide long-term liquidity of 1 trillion yuan to the market.

Pan Gongsheng pointed out that my country's current average statutory deposit reserve ratio is 7.4%, which is still relatively large compared with the central banks of major international economies. This is an effective tool to supplement the medium- and long-term liquidity of the banking system.

Give better play to the role of the market-based adjustment mechanism for deposit interest rates

  "In terms of interest rates, monetary policy operations insist on me taking the lead." Pan Gongsheng mentioned that there is still a gap between the current price level and the expected price target.

Major domestic banks lowered deposit interest rates in November and December last year.

  Pan Gongsheng said that starting from January 25, the central bank will reduce the re-lending and re-discount rates provided to financial institutions to support agriculture and small businesses from 2% to 1.75%. These measures will help promote the loan market with credit pricing benchmarks. The quoted interest rate (LPR) fell.

  In response to the gradual narrowing of domestic bank deposit and loan interest rate spreads, Xu Changneng, deputy governor of the People's Bank of China, mentioned that the central bank will comprehensively consider the relationship between deposit interest rates, financial management yields, dividend rates, etc., and better utilize the market-based adjustment mechanism of deposit interest rates. It supports banks in reducing liability costs while maintaining a reasonable and orderly market competition environment and creating conditions for lower loan interest rates.

Improve operating property loan policies for real estate companies

  Since last year, financial institutions, under the guidance of financial management departments, have focused on supporting the stabilization of financing channels for real estate companies, especially leading real estate companies.

  On the evening of the 24th, the General Office of the People's Bank of China and the General Office of the State Financial Supervision and Administration issued a notice on the management of operating property loans.

Pan Gongsheng pointed out that this policy supports high-quality real estate companies to revitalize existing assets, expand the scope of fund use, and improve liquidity conditions.

  In 2022, Shanxi Province will complete an investment of 12.2 billion yuan in affordable housing projects.

Photo by Gao Ruifeng

China’s price level will recover moderately in 2024

  In 2023, China's economy maintained low inflation.

What is the price trend this year?

  Pan Gongsheng pointed out that international financial organizations such as the IMF and financial institutions in multiple markets predict that as domestic demand continues to improve and the external price situation changes, China's price level will recover moderately in 2024.

  Pan Gongsheng also mentioned that the central bank will strengthen inter-cyclical and counter-cyclical adjustments in the use of monetary policy tools to create a good monetary and financial environment for economic growth and price stability.

Specifically, maintaining price stability and promoting a moderate price recovery are important considerations in controlling monetary policy.

We must adhere to the objectives of monetary policy, maintain currency value stability, and promote economic growth.

Optimize the investment of financial resources.

Guide financial institutions to scientifically assess risks, restrict the supply of financing to industries with overcapacity, and at the same time meet reasonable consumer financing needs in a more targeted manner.

Strengthen coordination and cooperation between financial policies and other policies.

The RMB exchange rate will remain basically stable at a reasonable equilibrium level

  "China's monetary policy has always been focused on China, while taking into account internal and external balance." Pan Gongsheng said that in 2023, faced with the spillover effects of the monetary policies of developed economies, the People's Bank of China lowered the policy interest rate twice based on domestic economic development. The deposit reserve ratio was lowered for the second time, maintaining reasonable and sufficient market liquidity, optimizing the credit structure, and strongly supporting the real economy.

Overall, the RMB exchange rate has remained basically stable despite the complex situation.

  He judged that the RMB exchange rate will continue to remain basically stable at a reasonable equilibrium level in 2024.

Factors such as the steady operation of the domestic economy, the shift in the Federal Reserve's monetary policy and the weakening of the US dollar's appreciation momentum, the good investment and hedging value of RMB assets, and the more solid micro foundation for exchange rate stability will support the RMB exchange rate.

  Data map.

Photo by China News Service reporter Yang Bo

The pace of credit disbursement throughout the year will be more balanced

  Will credit extension continue to maintain high growth in 2024?

  Regarding the credit situation in 2024, Xuanchangneng said that considering that banks had a "good start" and various policies continued to be effective in the second half of last year, it is expected that rapid credit growth will still be maintained in the first quarter of this year.

The People's Bank of China will guide financial institutions to grasp the pace and firmly support the real economy. It is expected that the pace of credit disbursement throughout the year will be more balanced.

  The press conference also disclosed that with the approval of the central government, the People's Bank of China will establish a credit market department to focus on the "five major articles" related to technology finance, green finance, inclusive finance, pension finance, and digital finance.