Adhere to finance to serve the real economy

"China Economic Weekly" chief commentator Niu Wenxin

In order to enhance the ability of foreign exchange funds for financial institutions, the People's Bank of China decided that starting from September 15, 2022, the foreign exchange deposit reserve ratio of financial institutions has been reduced by 2 percentage points, that is, the foreign exchange deposit reserve ratio has been reduced from the current 8%to 6%.

This is the information published on the central bank website on September 5. The next day, a strong rebound in the A -share market. However, the less reliable explanation also appeared: some people also associate the stock market and the appreciation of the RMB. How should I know correctly? This is very important for the healthy development of the capital market.

Objectively speaking, the A -share market should welcome the implementation of the implementation of foreign exchange deposits of commercial financial institutions. The reason is not expected to appreciate the RMB, but: the central bank uses "non -interest rates" to stabilize the RMB exchange rate. For the reality of the Chinese economy, this is a means to really consider the real economy, and it is a very correct decision.

Generally speaking, in the case of the continuous depreciation of the local currency, central banks in most countries will use interest rate hikes to retain them with more means of overseas capital and hot money, but China does not. When there are many foreign exchange, the excess foreign exchange is locked by increasing the foreign exchange deposit rate of commercial banks, thereby preventing excessive appreciation of the RMB; when there are few foreign exchange, the release of foreign exchange by reducing the reserves of foreign exchange deposits of commercial banks to prevent RMB from renminbi, thereby preventing the RMB from RMB Excessive depreciation. Of course, in this way, it is necessary to consider the impact of commercial bank exchange on RMB liquidity, as well as cost pressure brought about by foreign exchange. But in any case, as long as the impact of the negative factors is fully cracked, foreign exchange deposit reserves may become a good adjustment tool.

It should be said that in the process of appreciation of the US dollar, the depreciation of the renminbi is normal. The problem is that in the past, the appreciation of the US dollar will lead to the decline in energy such as energy, so it will not constitute a serious input price increase to China. But this time is different, the US dollar's control of energy and commodity products is not as good as before, especially under the background of the Russian and Ukraine conflict. Therefore, at this moment, if the RMB depreciation of the US dollar is too large, it will inevitably have a great adverse effect on China's prices due to input factors. Because of this, the choice of Chinese monetary policy really requires wisdom. On the one hand, it is necessary to motivate the healthy development of the economy at low interest rates; on the other hand, to prevent the renminbi from excessive depreciation due to low interest rates, bringing input price increases.

It is such a background that many investors in the A -share market are worried that the central bank has tightened currency for stabilizing the RMB exchange rate, or dare not adhere to low interest rate policies. But now, when the central bank suppresses excessive depreciation of the RMB by reducing the rate of foreign exchange deposit reserves, this obviously provides a "resentment pill" for investors in the A -share market.

Therefore, the A -share market should correctly understand the central bank as: reducing the foreign exchange deposit reserve ratio, which is the central bank's refusal to increase interest rates, and the use of the hellfilities to weaken the RMB exchange rate depreciation expectations. This is obviously a policy that China's real economy and the stock market should be welcomed.

(This article was published in "China Economic Weekly", No. 17, 2022)

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