Zhang Xiaohui: The Focus Of Monetary Policy In 2014

In the past 2014, the economic and financial situation at home and abroad was complicated.

The global economy is in a period of profound rebalancing, with the overall temperature and recovery, but the momentum of growth is still insufficient. Regional economic operation and macro policy differentiation are obvious. International financial markets and commodity prices fluctuate sharply, and geopolitical and other non economic disturbance factors increase.

The domestic economy is still in the three stage of superposition. The overall economic growth is in line with expectations, the employment and price situation is relatively stable, and the pace of structural adjustment has been accelerated. However, the driving force for economic endogenous growth remains to be strengthened, and the structural contradictions between growth and debt and investment are still high. Structural downadjustment and downside pressure and risk exposure have increased.

Due to complex factors such as high debt rate, rising risk premium and structural distortion, the rising cost of corporate financing has aroused widespread concern.

In the face of complex internal and external environment, the CPC Central Committee and the State Council adhere to the general idea of keeping steady in the future and harmonization of macroeconomic policies and policies to ensure that micro policies are to survive. In line with the relationship between steady growth, structural adjustment, promoting reform, improving people's livelihood and preventing risks, we should pay more attention to directional regulation on the basis of interval management. While stabilizing economic operation, we should emphasize structural adjustment and pformation and upgrading, guide financial resources to better serve the development of the real economy, take measures to alleviate the problem of high financing costs, deepen reform and stimulate economic vitality.

We need to continue to implement prudent monetary policy, maintain both the strength and the initiative, continuously improve the regulation and control methods and policy tools, and improve the pertinence and effectiveness of regulation and control. First, we must adhere to the overall stability and pay attention to adjusting the total amount of money in order to create a moderately moderate monetary and financial environment for economic restructuring and promote economic scientific development and sustainable development. Two, we should promote structural optimization, solve the outstanding problems in economic operation by adjusting the structure, revitalize the stock, optimize the increments, promote structural adjustment and pformation and upgrading, and strive to reduce the cost of social financing. Three, we should combine reform in regulation and control, further improve the regulatory mode, dredge the pmission mechanism, and improve the efficiency of financial operation and the ability of financial services to the real economy. The people's Bank of China conscientiously implements the deployment of the Party Central Committee and the State Council, and actively adapts itself to the new normal of economic development.

Focusing on the above work's main line and key points, the focus of monetary policy operation in 2014 has been laid in the following aspects.

Constantly replenish and perfect various tools to maintain a reasonable and abundant liquidity.

Since 2014, the people's Bank's liquidity management task has become more and more arduous and complicated. It faces not only the disturbance of capital flow, the change of fiscal expenditure and the IPO of capital market, but also undertaking many tasks such as establishing a price regulation framework and guiding the interest rate level of the market.

In order to keep the liquidity of the banking system in a stable and moderate stage, the PBC strengthens the ability to provide the underlying currency actively, and enriches and improves the tool portfolio according to the time limit, the main body and the purpose of the liquidity demand, so as to improve the flexibility, pertinence and effectiveness of the regulation.

We will carry out pilot projects of branch standing loan facility (SLF) to improve the central bank's channels for providing normal liquidity to small and medium-sized financial institutions.

Create medium term loan facility (MLF), provide intermediate base currency to commercial banks and policy banks that meet the requirements of macro Prudential Management, and guide them to provide low cost funds to the entity economic departments that conform to the national policy guidance.

Through the mortgage supplementary loan facility (PSL), we provide long-term stable and cost appropriate funds for the development of financial support for shanty towns.

At the same time, we should give full play to the preset fine adjustment function of the open market operation, reasonably grasp the direction, intensity and frequency of the operation, and shorten the duration of the open market repo operation from 28 days to 14 days according to the complex and changeful characteristics of the short term liquidity supply. We should make use of the short-term liquidity adjustment tool (SLO) to make up for the temporary funding gap, effectively cope with the short-term liquidity fluctuations caused by various factors, and maintain a reasonable and moderate liquidity.

In 2014, the open market carried out a total repo operation of 30210 billion yuan, launched an anti repurchase operation of 525 billion yuan, and carried out the central treasury cash management of commercial banks' time deposit business of 620 billion yuan.

Timely use of price tools to guide interest rates to moderate downward.

Pay more attention to the combination of volume and price, enhance the flexibility of open market operation interest rate, and guide the market interest rate by adjusting the total amount of liquidity.

For the four time in 2014, the 14 day repo operation interest rate was reduced by 60 basis points to promote stable operation of the money market.

Since September 2014, the interest rate of mortgage supplementary loan funds has been cut down moderately, and through the medium-term lending facilities, the role of the policy interest rate has been brought into play while providing the basic money supply, and the interest rate pmission mechanism has been dredged.

According to the fundamental economic changes, in November 22, 2014, we adopted asymmetric ways to reduce the loan and deposit benchmark interest rates, guided the financing cost down, and promoted the real interest rate to gradually return to a reasonable level.

Among them, the one-year lending benchmark rate of financial institutions dropped 0.4 percentage points to 5.6%, and the one-year deposit benchmark interest rate dropped 0.25 percentage points to 2.75%.

At the end of 2014, the maturity rate of the 3 - and 7 - year AA corporate bonds in the inter-bank market was 5.85% and 6.34%, respectively, representing 1.50 and 1.27 percentage points lower than those at the end of 2013.

In December 2014, the weighted average interest rate of loans in non-financial enterprises and other sectors decreased by 0.6 percentage points compared with January 2014.

We should improve the management of consensual loans, give play to the counter cyclical adjustment of the dynamic adjustment mechanism of differential reserves and the guiding function of credit structure.

According to the changes of economic and financial situation at home and abroad, the level of capital, the stability of financial institutions and the implementation of credit policies, the relevant parameters of the dynamic adjustment mechanism of differential reserve funds should be adjusted timely, and the adjustment power of small and medium-sized financial institutions with small loans supporting agriculture should be appropriately increased.

At the end of the first, second and the third quarter of 2014, we adjusted macro Prudential management indicators respectively, widened the space of consensual loans, and guided financial institutions to increase credit support for small and micro enterprises, "three rural", the central and western regions and underdeveloped areas.

In the fourth quarter, it also directed a small drop in support institution to support small farmers, and the capital level was enough to support further increase in loans, and there were no major risk cases or hidden risks.

We should implement the "directional reduction" and set up a positive incentive mechanism to guide financial institutions to raise the ratio of loans to agriculture, rural areas and farmers and small and micro enterprises.

Since the outbreak of the international financial crisis, it has become a new trend of the Central Bank of the major economies to conduct monetary policy pmission through directional operation. In 2014, the people's Bank of China tried to use monetary policy tools to support economic restructuring.

Since April 25th, the deposit reserve ratio of County commercial banks and cooperative banks has been reduced by 2 and 0.5 percentage points respectively.

Since June 16th, commercial banks which meet the requirements of prudent operation and have reached a certain proportion of loans to agriculture, rural areas and farmers and small and micro enterprises have lowered the RMB deposit reserve ratio by 0.5 percentage points.

In August 29th, the reserve requirement ratio of local legal person financial institutions in the Ludian earthquake hit area was reduced by 1 percentage points.

The new credit policy supports refinancing and establishes a central bank collateral management framework.

In early 2014, the people's Bank of China set up a new credit policy to support refinancing, including supporting agriculture and refinancing loans, reducing the financing cost of the real economy through preferential interest rates, and alleviating the problem of "financing difficulties and raising capital".

The number of re loans and rediscount quotas has been increased many times throughout the year, and the relevant management has been improved. The discount rates for agriculture related and small and micro enterprises are preferentially processed and re discounted, and the discount rate of demand for discounted bills is lower than the average interest rates of the same stalls. It supports financial institutions to expand credit for "agriculture, rural areas and farmers" and small and micro enterprises.

A pilot project was launched in the Ji'nan branch of the people's Bank of China and Guangzhou branch, and the credit policy support for refinancing was launched in the form of credit assets pledge.

At the end of 2014, the balance of loans for supporting agriculture, the balance of small loans, and the rediscount balance increased further than the same period last year.

We will continue to accelerate the marketization of interest rates and enhance the independent pricing power of financial institutions.

In November 22, 2014, the upper limit of the floating interest rate interval of the deposit rate was adjusted to 1.2 times the benchmark interest rate, and the timing of the benchmark interest rate was appropriately simplified.

Liberalize the interest rate limit of small foreign currency deposits in China (Shanghai) free trade pilot area, and make a beneficial attempt to further promote the marketization of foreign currency deposit interest rate.

We should improve the self-regulation mechanism of market interest rate pricing and gradually expand the scope of membership of the self-regulation mechanism.

We will steadily promote the issuance and trading of interbank certificates of deposit and explore experiences for issuing large certificates of deposit for businesses and individuals.

In 2014, the interbank market has issued 998 period, 898 billion 600 million yuan, and 411 billion 300 million yuan in the two level market.

Further improve the Marketization

Forming mechanism, increasing market supply and demand and determining exchange rate dynamics.

In 2014, the people's Bank of China basically withdrew from the normalization of foreign exchange intervention, and continued to enhance the two-way floating elasticity of the RMB exchange rate and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

Since March 17th, the floating rate of RMB against the US dollar in the inter-bank spot foreign exchange market has expanded from 1% to 2%.

In July 1st, commercial banks were allowed to cancel the price difference between the US dollar and the US dollar in the commercial banks, and the banks could make their own pricing. At this point, the bank's restrictions on the exchange rate limits for all the foreign currencies were abolished and the exchange rate formation mechanism was further improved.

In 2014, the central parity of RMB against the US dollar depreciated by 0.36%.

According to the bank for International Settlements, the effective exchange rate of RMB rose by 4.78% in 2014 1~11.

The renminbi has been launched directly to New Zealand dollar, pound sterling, euro and Singapore dollar and other currencies to promote cross-border use of RMB.

To provide foreign exchange funds to banks by means of currency swap and other ways to support enterprises' "going out".

Strengthening publicity and promotion of monetary policy

To guide and stabilize market expectations.

In recent years, with the accelerated development of the financial market and the gradual pformation of the monetary policy framework to the strengthening of price regulation, stability expectations are playing an important role in the pmission of monetary policy.

In recent years, more and more supplements and explorations have been made to policy instruments. It is more important to do well in communication with the market.

The people's Bank of China attaches great importance to information communication and expected guidance in the market. Through the platform of China's monetary policy implementation report, China's regional financial operation report, central bank's official website, central bank's micro-blog, and window guidance, the people's Bank of China can timely convey the central bank's macroeconomic analysis and judgement to the market, timely disclose the improvement and use of monetary policy tools, take the initiative to respond to social hot spots and market concerns, announce policy positions, appropriately indicate risks, and guide and stabilize public expectations.

Overall, robust

Good results have been achieved.

In 2014, the liquidity of the banking system was reasonable and abundant, and the total amount of money and credit and social financing increased steadily and moderately. The interest rate of the market dropped and the interest rate of the financial institutions decreased.

By the end of 2014, the broad money M2 growth is expected to run basically within the reasonable range of the expected target. The total amount of new RMB loans is nearly 10 trillion yuan, and the total amount of social financing is roughly the same as in 2013.

Since the second half of 2014, the growth rate of money and the total amount of social financing has slowed down, which is related to the acceleration of economic restructuring, the contraction of off balance sheet financing, the slow expansion of some soft constraints, and the strengthening of regulatory measures.

Loan structure continued to improve, small and micro enterprises and agriculture related loans grew faster than all loans.

The stability of the monetary and financial environment promotes the steady development of the economy and the pformation of the economic structure.