It was a period when the RMB exchange rate "breaks through 7", more than 20 central banks around the world played the cards of interest rate cuts and the concentrated exposure of liquidity risks in domestic small and medium-sized financial institutions.

Recently, the official website of the People's Bank of China released the "China Monetary Policy Implementation Report for the Second Quarter of 2019" (hereinafter referred to as the "Report"), mentioning many aspects such as monetary policy, loan growth rate, RMB exchange rate, and taking over Baoshang Bank .

The time when the report was released was at a time when the RMB exchange rate "breaks through 7", more than 20 central banks around the world played the interest rate cut card and the concentrated exposure of liquidity risks in domestic small and medium-sized financial institutions. A reporter from the Beijing News noticed that the central bank mentioned many times in its semi-annual report to maintain its determination. Among them, when summarizing the work in the second quarter, it was mentioned that "maintain determination and effectively respond to the impact of domestic and foreign uncertainties". Regarding the current economic situation, it was emphasized that "firm confidence, maintain determination, be fully prepared, and do your own thing seriously."

Keywords·Money Policy

Keep the overall gate of money supply , and do not "flood the flood"

The report stated that in the first half of 2019, in the case of complex and changeable internal and external environment, the central bank continued to implement a prudent monetary policy, timely and moderately countercyclical adjustments, and comprehensively use various policy tools such as open market operations, deposit reserve ratio , medium-term lending facilities, re-lending and re-discounting, to maintain a reasonable and abundant liquidity in the banking system and guide the smooth operation of money market interest rates. At the end of June, the excess reserve ratio of financial institutions was 2.0%, 0.4 percentage points lower than the end of the previous year and 0.2 percentage points higher than the same period last year. One of the changes in the external environment of

is the global "interest rate cut" this year. In the past three months, central banks in more than 20 countries including Thailand, India, New Zealand have introduced interest rate cuts. Among them, the Federal Reserve announced on August 1 that it would lower the federal funds rate by 25 basis points to 2% to 2.25%, which is the first rate cut in the United States since December 16, 2008.

Whether the People's Bank of China will follow up on the interest rate cut has attracted much attention. In this regard, the central bank stated that the next stage of prudent monetary policy should be moderately loose and tight, and countercyclical adjustments should be carried out in a timely and moderate manner, keep a good gate for the money supply, and do not "flood the flood". The growth rate of the broad money M2 and social financing scale should match the nominal growth rate of GDP. This is consistent with the recent meeting of the Political Bureau of the CPC Central Committee and the work video conference of the Central Bank in the second half of 2019.

Beijing News reporter noticed that "timely and moderately countercyclical adjustment" is different from the previous monetary policy implementation reports. Wang Han, chief macro analyst of Industrial Securities , analyzed that in the "main policy ideas for the next stage", the monetary policy implementation report emphasized "strengthening countercyclical adjustment" in the "main policy ideas for the next stage", and the first quarter of this year emphasized "timely pre-adjustment and fine-tuning", and this statement emphasized "timely and moderately countercyclical adjustment", and the focus returned to countercyclical adjustment again. Overall, some monetary policy tools may be used to hedge against domestic economic pressure.

The column of the report also mentioned that in view of the possibility of the global economy maintaining medium- and low-speed growth in the medium and long term, we must adhere to the principle of putting ourselves first, take into account international factors, grasp the comprehensive balance in multiple goals, grasp the comprehensive balance in multiple goals, maintain determination, and make plans for medium- and long-term running. Deng Haiqing, chief economist of Wall Street News, believes that this means that when China's macroeconomics has not changed significantly, monetary policy will not simply follow the peripheral central banks to turn monetary easing ("short running"), but should consider the long-term nature of the global economy's medium- and low-speed growth, and reserve policy space for potential risks that may arise in the future ("medium- and long-term running").

. With the monetary policy not loosening, the central bank has issued multiple red envelopes to small and micro enterprises in the first half of the year. Among them, the report mentioned that the central bank has built a new framework for the "three levels and two advantages" deposit reserve policy, expanding the scope of policy support for targeted reserve requirement ratio cuts in inclusive finance.

keywords·exchange rate

RMB exchange rate against the US dollar, appreciated in the past half of the trading day in the first half of the year

The report also mentioned that since August, due to the impact of the international economic and financial situation, unilateralism and trade protectionist measures, and expectations of imposing tariffs on China, the RMB has depreciated against the US dollar, exceeding 7 yuan, reflecting the fluctuations in foreign exchange supply and demand and international foreign exchange markets.

Residents, enterprises and financial institutions all view this rationally and objectively. Market expectations are generally stable. The RMB exchange rate continues to remain basically stable at a reasonable equilibrium level.

From the first half of the year, the report stated that since 2019, the RMB exchange rate has been based on market supply and demand, and has referenced to changes in the exchange rate of a basket of currencies, with declining and rising, and has fluctuated in two directions, maintaining basic stability at a reasonable equilibrium level. In the first half of the year, the mid-price of the RMB exchange rate against the US dollar was 6.6850 yuan and the lowest was 6.8994 yuan. Among the 118 trading days, the appreciation was 53 trading days, the depreciation was 64 trading days, and the unchanged one trading day was the largest single-day appreciation amplitude of 0.70% (469 points), and the maximum single-day depreciation was 0.61% (414 points).

The central bank said that the next step will steadily deepen the market-oriented reform of the RMB exchange rate, improve the floating exchange rate system based on market supply and demand, adjust with reference to a basket of currencies, and maintain the flexibility of the RMB exchange rate, and play the role of an automatic stabilizer for exchange rate regulation of the macro economy and balance of payments. If necessary, strengthen the macro-prudent management of , stabilize market expectations, and maintain the basic stability of the RMB exchange rate at a reasonable equilibrium level. Accelerate the development of the foreign exchange market, adhere to the principle of financial services for the real economy, and provide exchange rate risk management services for import and export enterprises based on the principle of actual demand.

In fact, after the RMB exchange rate "breaks 7", the central bank and State Administration of Foreign Exchange have spoken continuously, expressing their full confidence in the RMB. In addition, in February, May and June this year, the central bank issued central bank notes in Hong Kong three times.

This is the first time that the central bank has proposed this mechanism in its monetary policy implementation report. Industry insiders analyzed that the central bank's issuance of central bills on offshore market can recycle the RMB from the offshore market, increase the cost of selling RMB, and help stabilize the RMB exchange rate.

It is worth mentioning that on August 6, the US Treasury Department listed China as a "transfer rate manipulator." In the past weekend, the International Monetary Fund (IMF) released China's annual Article 4 consultation report stating that despite the depreciation of the RMB against the US dollar, China's foreign exchange reserves are sufficient and there is no sign that China has implemented large-scale foreign exchange intervention.

Keywords·Financial risk disposal

Baoshang Bank's business is normal, and it will promote market-oriented reform and reorganization

When talking about preventing and resolving major financial risks, the "Report" mentioned the takeover of Baoshang Bank in late May. The report stated that since the takeover, Baoshang Bank's business has been operating normally, and outlets are in order in various places, and no outlet runs or mass incidents have occurred; Baoshang Bank's existing interbank certificates of deposit have been successfully completed, and the interbank business has gradually returned to normal. According to the idea of ​​"breaking the new and old", Baoshang Bank successfully issued 6 interbank certificates of deposit after takingover; the large-scale debt acquisition work was successfully completed, protecting the legitimate rights and interests of the vast majority of depositors to the greatest extent, and stably achieving the policy goals of strictly enforcing market discipline and preventing moral risks; the outflow of funds is less than expected, and the public opinion reflection is generally stable, and the first phase of Baoshang Bank's takeover of custody has come to an end. The central bank will continue to work with relevant departments to do a safe and orderly job in taking over Baoshang Bank, and promote the market-oriented reform and reorganization of Baoshang Bank on the basis of inventory and asset verification.

Considering that the market sentiment fluctuated after Baoshang Bank was taken over, and the market's preventive liquidity demand increased as the end of the six months, the central bank appropriately increased its efforts in the open market reverse repurchase operation, and began to launch 28-day reverse repurchase operations and 14-day reverse repurchase operations in mid-June to meet the market's liquidity demand across the six months, stabilize short-term market fluctuations, and provide a suitable liquidity environment for all types of market entities, including small and medium-sized banks and non-bank institutions to smoothly pass the end of the six months.

The central bank stated that in the next stage, it will grasp the rhythm and intensity of risk disposal, promptly resolve the liquidity risks of small and medium-sized financial institutions, resolutely block the transmission and spread of risks, improve macro-prudential management, form a joint force with financial micro-prudential supervision, functional supervision and behavioral supervision, and promote the healthy and stable operation of the financial market system.

"Striving that by 2020, the adaptability of the financial structure will be improved, the ability of financial services to serve the real economy will be significantly enhanced, the level of legalization of financial work will be significantly improved, the construction of hard constraint systems will be comprehensively strengthened, and systemic risks will be effectively prevented and controlled, creating a good financial environment for the comprehensive building of a moderately prosperous society." The central bank said.

Deng Haiqing analyzed that this means that it is necessary to avoid the "one-size-fits-all" irrational contraction brought about by market panic, and to reduce the excessive dependence of various financial institutions on interbank businesses, and no longer follow the old path of excessive expansion of interbanks and ignoring risk management, and do a good job in their own liquidity management.

Regarding the old path of excessive expansion of interbanks and ignoring risk management, Deng Haiqing explained that from 2014 to 2016, all financial institutions have fully leveraged, and active liabilities have led to "asset shortage", relying on money market funds for interbank idles and bond investment, and the market consistency is "leveraged, increased duration, and reduced qualifications", ignoring the risks of investment, but only pursuing returns.

Deng Haiqing reminds that the recent bond market has strong expectations for monetary easing to increase its investment, and leverage and duration are relatively common. If subsequent liquidity fluctuates, these excessively radical investment behaviors will face huge liquidity risks.

Beijing News reporter Cheng Weimiao Hou Runfang Editor Wang Jinyu Proofreading Fu Chunyan