The LPR interest rate for April has just been released. According to data from the Central Bank, the LPR interest rate in China remained unchanged in April, with the one-year interest rate being 3.7%, and the LPR interest rate for more than 5 years is 4.6%. Both have not changed from before.
0 The LPR interest rate in April did not change
Someone said that China's economy is now more difficult to be affected by the epidemic. We didn't the central bank say that it would be loose, relaxed, and stimulate the economy? Why didn't interest rate cuts this time?
is actually right. The central bank has cut the reserve requirement ratio on April 15, releasing more than 500 billion yuan of funds, injecting them into the market, giving real estate and A shares confidence.
But the issue of interest rate cut is actually not that simple. Today I will talk about this topic.
lower reserve requirement ratio OR lower interest rates? How did the central government consider
Why did the central government choose to lower the reserve requirement ratio instead of lowering interest rates? This starts with the instructions of the "National Standing Committee".
The so-called "state meeting" refers to the State Council Executive Meeting .
National Standing Committee
This is one of the current statutory meetings of the State Council of the People's Republic of China . is convened and presided over by the Prime Minister to discuss and decide major issues in the work of the State Council, and is generally held once a week.
According to the latest State Council meeting, the requirements for a reduction in the reserve requirement ratio were clearly put forward at the meeting. Therefore, using the central government as the executive body, it prepared for the reduction in the reserve requirement ratio on April 15.
Why does the State Council choose to lower the reserve requirement ratio instead of lowering interest rates? This is because the United States is crazy about hiking interest rates on the outside, and hiking is hiking interest rates will bring capital outflows. interest rates are inverted , and affects China's economic development and RMB exchange rate stability.
The Federal Reserve raises interest rates, affecting China's economy and development stability
At this time, choose to raise interest rates, will cause the "interest rate difference" between China and the United States to grow larger, and is not conducive to our financial stability.
But historically, even if the Federal Reserve continues to raise interest rates, the obstacles to domestic reduction in reserve requirement ratio are still relatively small. Because the reserve requirement ratio cut does not involve interest rates, it only releases the funds we "sealed" in the bank. So this is purely our internal policy.
Simply put, it is easier to lower the reserve requirement ratio, and it also has the same effect as lowering interest rates, which stimulates the economy. So after consideration, we chose the means of lowering the reserve requirement ratio. On April 15, the interest rate cut on the 20th will naturally not come. Will the interest rate cut in
lead to foreign capital outflow?
Just said that interest rate cuts will lead to an increase in interest rate gap between China and the United States, leading to foreign capital outflows. This is actually a normal economic phenomenon.
For example, before the interest rate hike, the money existed in China, giving you a 2% interest rate, the United States is 0.5%, and , so China gets more money, and the funds all come to China.
The Federal Reserve is responsible for setting the US interest rate
But when the United States raises interest rates, the US interest rate becomes 3%, and China cuts interest rates to 1.5%, and Then of course, the money is more cost-effective in the United States, so international capital will flow out of China, which is not good for China.
When the US rate hike is confirmed, the more China's interest rate cuts, the bigger the interest rate difference between China and the United States will be, so more foreign capital will flee China and go to the United States.
This is how many dollars harvest the world, and it is a clear card. Unless you pay a relatively large price, it cannot stop the United States from harvesting.
So, how did China stop the United States from harvesting? Simply put, China has built a financial firewall.
According to the current policy, our large amount of funds in China go abroad and need to be reviewed. Each citizen also has a certain foreign exchange quota. Currently, is about 50,000 US dollars.
China's foreign exchange quota of US$50,000
exceeds this quota, so it cannot be used. is to prevent large-scale capital outflows. In addition, the anti-money laundering work in China is also done well. Once there is a large amount of funds changing, it will be inspected to see if the money is illegal.
Generally speaking, if China cuts interest rates, it will indeed intensify the interest rate gap between China and the United States. However, China has established a complete set of financial firewalls to stabilize foreign exchange. With China's 3.2 trillion US dollars in foreign exchange reserves , there is no need to worry too much about China's interest rates and foreign exchange issues.
Trade surplus helps stabilize foreign exchange
In addition to our financial firewall, our foreign trade and export industries are China's greatest anti-harvest confidence. Why do you say so?
For example, in the first three months of this year, China's foreign trade surplus was about US$162.9 billion. This number of increased by 50% year-on-year. Such a large foreign trade surplus is enough to keep the Chinese RMB at a relatively high exchange rate .
So you look at the exchange rate of RMB and US dollar, China has been appreciating against the US dollar in recent times. But other countries are different, and they have been depreciating against the US dollar because they do not have such strong exports and manufacturing industries, and they cannot have a huge trade surplus with the United States like China.
RMB appreciates for a long time
So many countries, especially some small countries, have fallen badly, which is equivalent to being harvested by the United States.
LPR interest rate does not drop
Why did the LPR interest rate in April not drop? I have already said that will now talk about the subsequent impact of this situation.
First of all, the 1-year LPR interest rate is related to the capital cost of the enterprise, so the financial pressure of the enterprise needs to be carried out through targeted support for the reduction of the reserve requirement ratio.
Second, the 5-year LPR interest rate continues to stabilize, shows that our real estate industry has another trump card that can be played in the future, because the 5-year LPR interest rate is closely following the mortgage, and this will be the next step. Our mortgage interest rates will be lowered, which is a big benefit for real estate.
summary
In general, the central bank adopts a method of lowering the reserve requirement ratio rather than a rate cut. is mainly because the United States is raising interest rates frantically and harvesting the world. In order to prevent the United States from harvesting, it is more cost-effective to use a reserve requirement ratio cut than a rate cut.
The epidemic is still there, Shanghai, come on
So you see, the hegemony of the US dollar is actually threatening us at all times. As long as the world finance is under the influence and control of the Federal Reserve, our policies must be relied upon.
Although we dream of breaking the hegemony of the US dollar, it still takes a long time to gradually collapse the US dollar credit. and other things will delay the US dollar credit until one day the US dollar credit goes bankrupt. The 30 trillion US bond will destroy the United States. In this way, China will no longer have to worry about the problem of interest rate cuts leading to capital outflows.
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