Why choose the central bank to reduce the overall standard New Year'sDay? Still related to this year's early spring.

If you don't make big moves during the holidays, it's not your mother.

China News Agency reporter Zhang Xinglong photographed

on January 1st, the central bank announced a comprehensive cut to support thedevelopment of the real economy and reduce the actual cost of social financing.

From January 6, China will reduce the deposit reserve ratio of financialinstitutions by 0.5 percentage points (excluding financial companies, financialleasing companies and auto finance companies).

Unlike several targeted interest rate cuts in recent years, this time thecentral bank carried out a comprehensive interest rate cut.

How can I do my best?

Relevant central bank officials said that the overall reduction reflects acounter-cyclical adjustment, releasing more than 800 billion yuan of long-termfunds.

Officials said that the reduction will effectively increase the stable fundingsources for financial institutions to support the real economy, and reduce thefinancial costs of financial institutions supporting the real economy anddirectly supporting the real economy.

At the same time, the Minister of Health will maintain reasonable andsufficient liquidity, which is conducive to the growth of monetary credit andsocial financing to adapt to economic development and create a suitablemonetary and financial environment for high-quality development and supply-sidestructural reforms. And use market-oriented reform methods to unblock thetransmission of monetary policy, which will help stimulate the vitality ofmarket participants, further play the decisive role of the market in theallocation of resources, and support the development of the real economy.

Why is the restore accurate at this point?

The chief analyst of fixed income of CITIC Securities Research Departmentclearly stated that the Spring Festival of 2020 is ahead of previous years, andthe liquidity environment is affected by a variety of factors, including: lowpressure on capital maturity, sharp increase in cash demand, strong uncertaintyof tax intensity and speed, Fiscal expenditures and issuance of specialbonds. The central bank will adopt lower standards and open marketoperations to arrange liquidity for the Spring Festival, which will create arelatively stable capital interest rate.

Wen Bin, chief researcher of China Minsheng Bank, said that the overallreduction of 0.5 percentage points is in line with market expectations. Inview of the reverse repurchase due in January of 600 billion yuan, coupled withtax payments, special bonds issued by local governments, and cash demand duringthe Spring Festival, liquidity is under pressure. On the one hand, the 800billion yuan of funds released through reductions can meet the above-mentionedliquidity needs; on the other hand, the issuance of low-cost long-term funds isconducive to reducing the capital cost of banks and guiding banks to reduce thefinancing costs of the real economy. It is expected that on January 20,the quotation of the new version of LPR will decrease slightly, with a one-yearLPR of 4.1% and a five-year LPR of 4.75%.

Relevant central bank officials said that the reduction has increased thefunding sources of financial institutions, major banks should reduce theirservice focus, small and medium banks should pay more attention to their mainresponsibilities, and actively use the reduced funds to increase support forsmall and micro enterprises and private enterprises. .

In this overall reduction, small and medium-sized banks such as city commercialbanks operating in provincial administrative regions, rural commercial banksserving the county, rural cooperative banks, rural credit cooperatives, andvillage and town banks have received more than 120 billion yuan. Long-termfunding is conducive to strengthening the financial strength of small andmedium banks based on local, serving small and micro enterprises and privateenterprises, and achieving capital withdrawal. At the same time, this reductionwill reduce the bank's capital cost by about 15 billion yuanannually. Bank transfers can reduce the actual cost of social financing,especially for small and micro enterprises and private enterprises.

"Easy" has become a global theme

In recent years, "easy" has become the subject of monetary policy inmajor world countries.

Li Yang, an academician of the Chinese Academy of Social Sciences and directorof the National Finance and Development Laboratory, said that we areexperiencing the fourth wave of global debt. Major developed economies,including the United States, Europe, and Japan. Having made full use ofthe privileges given to me by their reserve currency issuing countries,

Zhu Min said that in recent years, the level of global inflation has remainedlow. Inflation rates in emerging markets and developing economies used torange from 6% to 12%, and now they have fallen to 3% to 4%. In developedeconomies, inflation rates have fallen below 2%. Inflation rates in Europe andJapan are about 1%, lower than the central bank's 2% standard. Lowinflation and slower growth give the central bank a reason and space to cutinterest rates. Ten years after the financial crisis, the global economyhas not fully recovered, and the overall interest rate level is stilllow. However, it has once again entered the stage of global interest ratecuts and low interest rates, which is an important feature of the post-crisisera.

Has China's monetary policy changed?

In the tide of global central bank easing, does the announcement by the centralbank of a comprehensive interest rate cut mean a change in the orientation ofmonetary policy?

In response, the People's Bank of China stressed that monetary policy willremain unchanged.

The central bank said the rate cut was to oppose cash delivery before theSpring Festival. The total liquidity of the banking system will remainbasically stable, flexible and moderate. This is not a flood. Itreflects the scientific and stable grasp of the countercyclical adjustment ofmonetary policy, and the stable monetary policy orientation has not changed.

What is certain is that China will continue to implement a prudent monetarypolicy, maintain flexibility and moderation, avoid floods, balance internal andexternal balances, maintain reasonable and sufficient liquidity, and adapt thegrowth of monetary credit and social financing to economic development.Stimulate the vitality of market players and create a suitable monetary andfinancial environment for high-quality development and supply-side structuralreform.

(Original question: Why did the central bank lower the standard on January 1,2020?)