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China mulls deposit rate cuts for revival

2020-3-10 15:19

A teller counts cash at a bank branch in Hangzhou, capital of East China's Zhejiang province. [Photo by Hu Jianhuan/For China Daily]

 

PBOC considers move to reduce cost of funds for firms hit by epidemic

 

China may opt to cut the benchmark one-year deposit rate, the first time it would do so in four years, to reduce the cost of funds for coronavirus-hit companies, especially if the upcoming economic indicators for January and February hurt market sentiment and increase concerns for policymakers, analysts said on Monday.

 

Cutting the one-year deposit rate, which is currently at 1.5 percent and unchanged since 2015, could be a further step by the People's Bank of China, the central bank, to boost credit and speed up resumption of business operations amid the novel coronavirus epidemic.

 

Major economic indicators, including industrial output and fixed-asset investment data, will be announced next Monday. It will be the first set of official data that will gauge the broad economic impact after the virus outbreak.

 

The central bank will make appropriate adjustments onto the benchmark rate in due time, based on the economic growth fundamentals and price levels, PBOC Vice-Governor Liu Guoqiang said on Feb 22.

 

The US Federal Reserve's emergency decision to reduce policy interest rates by half a percentage point last week, and possible subsequent cuts, can "broaden the space" for the Chinese central bank to further lower interest rates, for both lending and deposit, although the PBOC has not followed the US move immediately, said Ming Ming, an economist with CITIC Securities.

 

The market, amid fears of the outbreak spreading all over the world, expected the Fed to continually cut rates to cushion the economic blow. The next cut may come later this month after the Federal Open Market Committee's regular meeting, said analysts.

 

In a research note, global ratings agency Standard & Poor's Global said: "Given that monetary policy works with a lag, cutting rates now will help speed up recovery when the coronavirus concerns have passed. If the rout in the financial market continues, more rate cuts are likely to follow."

 

The PBOC has skipped open market operations for 14 consecutive trading days since Feb 18, as it recognized liquidity in the banking sector is at a reasonably ample level. The seven-day reverse repo rate, a major interest rate in the money market, has remained unchanged at 2.4 percent since the PBOC cut it only by 10 basis points in late February.

 

The benchmark lending rate-the one-year loan prime rate-has been reduced by 26 basis points since August 2019 to 4.05 percent on Feb 20. In the meantime, the decrease in deposits has pushed up the deposit rate and squeezed profits earned by commercial banks from interest rate spreads.

 

Due to the coronavirus outbreak, recession risks for the global economy are rising, and weak demand will put more pressure on China's economy. Effects of lowering the lending rate will be limited, which will push commercial banks to reduce costs by cutting the deposit rate, said Zhou Junzhi, a macroeconomic analyst with GF Securities.

 

The deposit rate cut, if rolled out, would not be large, as space is limited after the monetary easing cycle between the years 2014 and 2016, and it is hard for small and medium-sized enterprises to benefit from the deposit rate cut, according to a research note from Nomura Securities.

 

Monetary authorities have showed caution on stimulus since the outbreak, as they wanted to monitor the inflation and leverage level, and prefer the option to utilize conventional measures. PBOC officials believe that once the rate approaches zero, the monetary policy measures will be less efficient and passive.

 

The central bank reaffirmed subsequently that it would not issue any "short-term stimulus" measures to boost the property sector, as an engine to boost economic growth. Analysts said the PBOC action showed its concern about excessive easing, which may cause high debt levels, such as the side-effects of the massive stimulus after the 2008 global financial crisis.

 

"The deposit rate cut is necessary to prevent sudden drops of broad credit in February and March-a possible consequence of the virus. But effects would be limited without taking stronger fiscal policies," said Zhang Bin, a senior researcher of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, who suggested the central government could directly issue special bonds to contain the virus.

 

So far, the government has focused on targeted measures, including tax cuts for SMEs, reductions in companies' social security payments, and deferring loan principal and interest payments for small businesses affected by the outbreak.

 

在中国东部浙江省省会杭州市的一家银行分行,一名出纳员正在清点现金。[中国日报胡建环摄]


央行考虑为受疫情影响企业降低资金成本


中国可能会选择将一年期存款基准利率,将第一次在四年,为coronavirus-hit企业降低资金的成本,特别是即将到来的经济指标为1月和2月伤害市场人气,增加对决策者的担忧,分析师周一表示。


目前一年期存款利率为1.5%,自2015年以来一直保持不变。在新型冠状病毒流行的情况下,下调一年期存款利率可能是中国央行为提振信贷、加快恢复业务而采取的进一步举措。


包括工业产出和固定资产投资数据在内的主要经济指标将于下周一公布。这将是第一批官方数据,将衡量病毒爆发后的广泛经济影响。


央行副行长刘国强2月22日表示,央行将根据经济增长基本面和物价水平适时对基准利率进行适当调整。


美国联邦储备理事会(美联储,fed)的紧急决定上周减少百分之一的政策利率,削减和可能的后续,可以“扩大空间”中国央行进一步降息,贷款和存款,虽然中国央行没有遵循美国立即行动,明明说,中信证券的经济学家。


由于担心疫情在全球蔓延,市场预期美联储将继续降息,以缓冲经济冲击。分析师表示,下一次降息可能在本月晚些时候美国联邦公开市场委员会(fomc)例会之后。


全球评级机构标准普尔全球(Standard & Poor's global)在一份研究报告中表示:“鉴于货币政策的实施存在滞后性,在有关冠状病毒的担忧过去后,现在降息将有助于加速复苏。”如果金融市场继续溃败,接下来可能还会有更多的降息。”


自2月18日以来,中国央行已连续14个交易日停止公开市场操作,因为它承认银行业的流动性处于合理充裕的水平。自中国央行在2月底仅降息10个基点以来,作为货币市场主要利率的七天期逆回购利率一直维持在2.4%的水平。


自2019年8月以来,基准贷款利率(一年期贷款优惠利率)已下调26个基点,至2月20日的4.05%。与此同时,存款的减少推高了存款利率,压缩了商业银行从利差中赚取的利润。


受冠状病毒疫情影响,全球经济衰退风险上升,需求疲软将给中国经济带来更大压力。广发证券宏观经济分析师周军之表示,降低贷款利率的效果将是有限的,这将推动商业银行通过降低存款利率来降低成本。


野村证券(Nomura Securities)的一份研究报告显示,存款利率下调幅度不会很大,因为在2014年至2016年的货币宽松周期结束后,空间有限,中小企业很难从存款利率下调中受益。


自危机爆发以来,货币当局对刺激措施表现出谨慎,因为他们希望监控通胀和杠杆水平,并倾向于使用常规措施。中国央行官员认为,一旦利率接近于零,货币政策措施的有效性和被动性就会下降。


随后,中国央行重申,不会出台任何旨在提振房地产业的“短期刺激”措施,以推动经济增长。分析人士表示,中国央行的行动表明了它对过度宽松的担忧,这种宽松可能会导致高债务水平,比如2008年全球金融危机后大规模刺激措施的副作用。


存款利率的下调是必要的,以防止2月和3月广泛信贷的突然下降——这可能是病毒的后果。但如果不采取更强有力的财政政策,效果将是有限的,”中国社会科学院世界经济与政治研究所(Institute of World Economics and Politics at the Chinese Academy of Social Sciences)高级研究员张斌表示。他建议,中央政府可以直接发行特别债券来遏制这种病毒。


到目前为止,政府已经把重点放在了有针对性的措施上,包括对中小企业减税,减少企业的社会保障支出,推迟对受疫情影响的小企业的贷款本金和利息支付。

 

原作者: Chen Jia 来自: china daily