What is the impact of the central bank’s RRR cut and the release of 900 billion yuan on real estate?
On the evening of September 6, the central bank announced that in order to support the development of the real economy and reduce the actual cost of social financing, the People’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage point on September 16, 2019 (excluding finance companies, financial leasing companies and auto financing companies). In addition, in order to promote greater support for small and micro enterprises and private enterprises, the deposit reserve ratio of city commercial banks operating only in provincial administrative areas was reduced by 1 percentage point, which was implemented twice on October 15 and November 15, each time by 0.5 percentage point.
This is the third RRR cut by the central bank this year, and it is also the second comprehensive RRR cut. Why did the RRR cut choose this time, what signals were released and what impact will it have on the real estate industry?
This RRR cut is not "flooding"
In response to the RRR cut, the central bank said that the long-term funds released by the RRR cut were about 900 billion yuan, including about 800 billion yuan from the overall RRR cut and about 100 billion yuan from targeted cuts to required reserve ratios. The statutory reserve ratio of financial companies, financial leasing companies and auto financing companies is 6%, which is the lowest among financial institutions and is already at a low level. Therefore, these three types of financial institutions are not included in this comprehensive RRR cut.
The central bank said that it will continue to implement a prudent monetary policy, not engage in "flood irrigation", pay attention to directional regulation, take into account internal and external balance, increase counter-cyclical adjustment, maintain reasonable and sufficient liquidity, and maintain
The growth rate of broad money M2 and social financing scale basically matches the growth rate of nominal GDP, creating a suitable monetary and financial environment for high-quality development and supply-side structural reform.
Yan Yuejin, research director of think tank center of Yiju Research Institute, told China Economic Times that the RRR cut was in line with expectations and became the most important adjustment of monetary policy direction since the second half of 2016. In other words, since the second half of 2016, the overall policy environment has been based on deleveraging. Although there are some RRR cuts in the middle, they are all related to structural adjustment, and liquidity control is actually very strong. But this time, there are two obvious changes.
First, before the RRR cut, the the State Council executive meeting has clearly defined the orientation of reducing the interest rate cost, and also explicitly mentioned the concept of comprehensive RRR cut. In fact, the policy tone is very clear and the market expectations are highly consistent, which provides a very clear path for many enterprises to actively plan their investment and start construction in the fourth quarter. This can also be understood as expected management.
Second, this RRR cut, the central bank mentioned the release of long-term funds of 900 billion yuan, of which 800 billion yuan was released by the comprehensive RRR cut, which is actually meaningful. That is, the wide liquidity effect brought by the RRR cut is obvious, and the 800 billion yuan of comprehensive RRR cut has a positive impact on all walks of life in the macro economy.
What is the impact on the real estate industry?
Regarding the impact of the central bank’s RRR cut on the real estate industry, Yuan Jiancheng, vice president of Zhuge Housing Search, told this reporter that the current economic situation is under great pressure, and the external economic situation is also complicated and changeable. Before the the State Council executive meeting, it was proposed to apply the general RRR cut and the targeted cuts to required reserve ratios policy mainly to promote economic transformation and economic development, and it was aimed at the real economy, not the real estate market. With the tightening of the real estate market supervision policy, it is difficult for the policy of lowering the standard to make the funds flow into the real estate sector. In the future, the interest rate in the real estate market is also difficult to decline. For housing enterprises, it is impossible to expect the relaxation of funds in the second half of the year. The best choice is to speed up sales to ease the pressure on cash flow.
Yuan Jiancheng said that the decision of the People’s Bank of China to lower the deposit reserve ratio of financial institutions was consistent with the spirit of the previous the State Council executive meeting. The scale of this RRR cut was nearly 900 billion yuan, and the targeted RRR cut reached 100 billion yuan. In terms of strength, it was the largest RRR cut in recent years, which helped financial institutions to increase the sources of funds to promote the real economy. The RRR cut is a hedge with the tax period in mid-September, and the total amount of liquidity in the banking system will remain basically stable. This RRR cut is not "flooding", and the prudent monetary policy orientation has not changed. However, this RRR cut is not aimed at the real estate market, and the regulation of real estate will not show signs of relaxation in the short term.
Yan Yuejin believes that this RRR cut is of positive significance for the development of the real estate industry. In the second half of this year, the judgment on the real estate market is generally pessimistic, including the previous LPR policy. In fact, the final conclusion will be that the mortgage interest rate will only rise, not fall. In the second half of this year, there are still actions to suppress real estate in various places. However, the central bank’s RRR cut, including the previous the State Council meeting, actually shows that stabilizing the economy is more important than deleveraging in the past. The real estate industry itself will continue to play the role of stabilizing the economy, so it will often be concerned by all kinds of subsequent funders.
Zhang Hongwei, director of the same policy consulting research center, said that the the Political Bureau of the Communist Party of China (CPC) Central Committee meeting on July 30th reiterated "no speculation in housing" and further emphasized that "real estate should not be used as a short-term means to stimulate the economy". It can be said that before the RRR cut, the real estate market has been strictly restricted from the policy side and the financial side, and the tone of the property market "stability-oriented" will not change. Therefore, the firewall of "window guidance" of the current policy on the property market funds has been built. Even if there is money in the market, it is difficult to enter the property market illegally. In the short term, at least in the fourth quarter, the regulation of the property market will continue, and the fundamentals of market adjustment will remain unchanged.
Our reporter Wang Songcai





























