Over trillions of Red envelopes quenching the thirst of the real economy

At the beginning of 2020, in order to fight the epidemic in full force, the central bank decisively set up a special reloan of 300 billion yuan based on the principle of prudent monetary policy and more flexibility and moderation, and provided preferential interest rate credit to key enterprises in the production, transportation and sales of key medical and living materials stand by. After the financial discount, the actual financing cost of the enterprise fell

RMB

In a fashionable restaurant in Mianyang, Sichuan, diners celebrated their long-lost reunion with their drinks. Li Yunsong, the person in charge of the restaurant, roughly calculated that November’s turnover increased by nearly 10% over the same period in 2019. In Li Yunsong’s view, the restaurant is rejuvenated after the epidemic, thanks to the “reassurance” of the bank.

Under the impact of the epidemic, in order to help small and medium-sized enterprises like Li Yunsong regain their strength, the central bank has successively increased the special re-lending and rediscount quota of 500 billion yuan to support the orderly resumption of work and production of enterprises, and increase the re-lending and rediscount quota of 1 trillion yuan to support the economy Resume development and inject financial water into the real economy.

In the second quarter of 2020, in order to enhance the directness and accuracy of funds, the central bank created the “Inclusive Small and Micro Enterprise Loan Extension Support Tool” and the “Inclusive Small and Micro Enterprise Credit Loan Support Program” two monetary policies that directly reach the real economy. Tools to effectively alleviate the pressure on repayment of principal and interest for small and micro enterprises and increase the proportion of credit loans. Liu Wei, President of Renmin University of China and member of the Monetary Policy Committee of the Central Bank, said: “The monetary policy is flexible and appropriate, which not only quenches the thirst of the real economy, but also avoids flooding.”

As of the end of November, the balance of broad money (M2) was 217.2 trillion yuan, a year-on-year increase of 10.7%, and the growth rate was 2.5 percentage points higher than the same period in 2019. The monetary policy has not only achieved the effect of releasing water to raise fish, but not allowing the water in the pond to overflow.

Let the real economy live!
They did these extraordinary actions…

From the perspective of capital prices, the dividends of the LPR reform continued to be released, and the financing costs of enterprises were significantly reduced. In August 2020, the Governor of the Central Bank, Yi Gang, specifically mentioned in an exclusive interview with a reporter from the Central Station that the loan interest rates of small and micro enterprises and private enterprises have reached a record low.

Supported by the ultra-conventional monetary policy, a series of data such as China’s GDP growth rate and the profit growth rate of industrial enterprises above designated size have turned positive. The rapid recovery of the real economy is behind the burden of financial institutions. In 2020, the state proposed that the financial system should give 1.5 trillion yuan in profits to the real economy, which caused a rare negative growth in the net profit of commercial banks. According to Qu Jian, vice president of the China (Shenzhen) Comprehensive Development Research Institute, such a huge profit concession is to keep the real economy alive. Qu Jian said: “If the real economy collapses and the supply chain breaks, banks are the biggest victims. Therefore, banks should actively promote profit transfers and let the real economy survive. This is a virtuous circle.”

Looking forward to 2021, will the unconventional monetary policy continue or gradually fade out, and will the financial system’s profit-sharing plan continue?

Liuyuanchun

Liu Yuanchun, vice president of Renmin University of China, interpreted: “The positioning of monetary policy in 2021 is much more complicated than that in 2020. Unconventional policies must be gradually withdrawn. However, we have to adopt some local conditions according to different industries and departments. Financial concession behavior still needs to be further implemented, either through fee reduction and concession, or through interest rate cuts.”

Let the real economy live! At the beginning of 2020, the central bank set up a special reloan of 300 billion yuan to provide preferential interest rate credit support; in the second quarter, it created the “Inclusive Small and Micro Enterprise Loan Extension Support Tool” and the “Inclusive Small and Micro Enterprise Credit Loan Support Plan”….. . This year, financial and monetary policies have become more flexible and appropriate, with huge gains! The year-end special article “China’s Economy Stands Steady 2020”, an inventory of China’s economic “exceptional” 2020.

1 Response

  1. Veronica says:

    Unlocking insurance funds could theoretically bring trillions of dollars into infrastructure, making it a massive stimulus.

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