Liquidity Stress Indicates The Urgency Of The Retention Rate.

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Zhou Xiaochuan, governor of the central bank, recently said that there was a lot of room for adjustment in terms of the deposit reserve ratio theoretically. But judging from the specific liquidity situation, its adjustment did not indicate the tightness of monetary policy.

However, it is the core concern of the author that whether the deposit reserve ratio needs to be lowered again or not.

The reason for the last reduction in the deposit reserve ratio (February 18th) is mainly due to the serious shortage of market liquidity and the liquidity of the banking system.

Financial data in January showed that M2 grew by 12.4% over the past month, hitting a new low for many years. For the first time in 3 years, new RMB loans were less than trillion yuan for the first time, but in the beginning of the year it was always the largest demand for credit.

These data reflect the tight liquidity of the banking system.

Of course, the need for banks to stabilize lending and control lending is also one of the causes of liquidity constraints.

Then, the question is whether the market liquidity is not tense now after the 0.5 percentage point reduction in the deposit reserve ratio this year. From the February financial data released by the central bank, M2 grew by 13% in February, up from January, but the liquidity of the market, especially the liquidity of the banking system, is still very tight.

First,

Second, deposits have also grown feeble.

In January, RMB deposits decreased by 800 billion yuan, or 780 billion yuan over the same period. In February, RMB deposits increased by 1 trillion and 600 billion yuan, an increase of 282 billion 400 million yuan compared with the same period last year.

As a result, Renminbi deposits appear to be showing signs of preventing a decrease.

However, at the end of 2, the balance of RMB deposits increased by 5 percentage points over the same period last year.

Despite the fact that there is an inevitable causal relationship between the decline in the size of new loans and the growth of bank deposits in 1-2 this year, it is difficult to completely conclude.

In the context of slower economic growth, if the growth rate of deposits is slower than the growth rate of loans, banks will naturally face the dilemma of "having rice without rice".

If monetary policy is not relaxed, bank liquidity and market liquidity may face further shortages.

In this context, reducing the deposit reserve ratio is not only a better choice, but also an objective need of the current economic and financial development.

Because in the short term, the growth of bank deposits and the shortage of liquidity will not only increase the profitability and capital supplement pressure of banks, especially small and medium-sized banks, but also affect the stability of banking industry.

Therefore, it is necessary to ease the deposit shortage problem in the banking system by lowering the deposit reserve ratio, thus satisfying the objective needs of the real economy.

What is more noteworthy is that if the liquidity of the banking system is tight and the growth rate of deposits is declining, it will not only endanger the stability of the banking industry itself, but also affect the stability of the whole national economy because of insufficient loans.

Because the tight liquidity of the banking system will lead to a tight market liquidity.

Data show that the total amount of social financing is still declining in the 1-2 months of this year, and to some extent, it reflects the objective situation of tight market liquidity.

Therefore, it has become very important to prevent the declining trend of the total social financing.

The author believes that by reducing the deposit reserve ratio, we can ease the tension of market liquidity and meet the capital needs of the real economy.

The above analysis shows that there is not only the objective demand for reducing the deposit reserve ratio in China, but also the possibility.

This is because, first of all, concerns about inflation have dropped.

CPI rose 3.2% in February, and continues to be on a downward trend.

At present, the market's judgement on future inflation trend is narrowing, and import inflation pressure is also weakening.

All these have opened the space for the central bank to reduce the deposit reserve ratio.

Second, the growth rate of new foreign exchange will drop sharply in the future, and even negative growth may occur.

From the newly released February trade figures, China has seen the biggest monthly trade deficit since its record, and the new foreign exchange has also fallen sharply, creating the possibility of reducing the deposit reserve ratio.

Although it is not yet easy to judge whether the trade surplus or trade deficit will become a trend change, the trade balance and trade surplus will continue to decline in a considerable period of time.

Financial stress is not good for the economy, and it is also obvious for foreign trade.

Therefore, at present