Interpretation ｜ The central bank’s RRR cut will release 1 trillion yuan of long-term funds, will it affect housing prices？
On July 9, in order to support the development of the real economy and promote the steady decline of comprehensive financing costs, the People’s Bank of China decided to reduce the deposit reserve ratio of financial institutions by 0.5 percentage points on July 15, 2021 (excluding financial institutions that have implemented the 5% deposit reserve ratio). After this reduction, the weighted average deposit reserve ratio of financial institutions is 8.9%.
It is reported that the RRR cut released long-term funds of about 1 trillion yuan.
In the eyes of the industry, on July 7th, the the State Council executive meeting proposed that monetary policy tools such as RRR reduction should be used in a timely manner to further strengthen financial support for the real economy, especially small and medium-sized enterprises, and promote the steady decline of comprehensive financing costs. Therefore, this RRR cut is expected.
From the point of view of time, this is the first RRR cut in 2021. The last RRR cut was in April 2020.
RRR cut is one of the expansionary monetary policies of the central bank. The central bank reduces the statutory deposit reserve ratio, which affects the number of banks’ loanable funds, thus increasing the credit scale, increasing the money supply, releasing liquidity and stimulating economic growth.
Generally speaking, the RRR cut is a big plus for the real estate market, but most people in the industry believe that with the tightening of real estate market regulation policies and the control of real estate finance, the RRR cut has limited impact on the real estate market.
Since the second half of 2020, the financing environment of the real estate industry has changed, and the regulatory authorities have issued new regulations with three red lines. The financing of real estate enterprises is limited, and debt reduction has become the main goal of most real estate enterprises, and the industry has begun to pursue its own internal growth. In addition, the centralized management system of banking financial institutions has been established, and banks have limited the amount of mortgage loans. In the first half of this year, the regulatory authorities severely cracked down on illegal business loans and consumer loans entering the property market.
It is difficult to change the running trend of the property market by lowering the standard
"Judging from the impact of RRR cuts on the property market, RRR cuts will not change the operating trend of the property market. At the same time, the RRR cut has limited effect on cities with strict regulatory policies. " Lu Wenxi, a real estate market analyst in Shanghai Zhongyuan, said.
First of all, before the RRR cut, the financial side has built a "fence", such as prohibiting business loans, and from the perspective of policy inclination, it is still necessary to guide funds to the real economy. There are still many control measures for the real estate financial system.
Secondly, first-tier cities such as Beishangguangshen and Shenzhen also have strong second-tier cities such as Hangzhou. At present, the regulation policy of the property market remains the most stringent, and new phenomena in the property market will be followed up in time, and the regulation measures will be continuously upgraded to maintain the smooth operation of the property market.
Real estate credit environment has limited impact.
Mao Dapeng, an analyst at the Index Division of the China Central Finger Research Institute, believes that for the real estate market, after the RRR cut, the total amount of bank loan funds will increase, and the recent problem of slow lending of bank housing loans will be improved, and corporate financing costs are expected to fall. However, the current financial supervision of real estate continues to be strengthened. The centralized management system of real estate loans introduced at the end of last year and the Notice on Preventing the illegal inflow of business loans into the real estate sector issued in late March this year clearly require strengthening the supervision of capital inflow into the real estate sector. Therefore, this RRR cut is beneficial or limited to the real estate market.
Previously, the central bank and China Banking and Insurance Regulatory Commission proposed to establish a centralized management system for real estate loans of banking financial institutions, and drew two red lines for real estate loans of commercial banks, one is the upper limit of real estate loans, and the other is the upper limit of personal housing loans.
Xu Xiaole, chief analyst of RealData, pointed out that the concentration management of real estate loans has a clear upper limit on the proportion of mortgage loans for different banks, which should be strictly implemented. In the second quarter, some banks extended the lending cycle due to insufficient quota, and even stopped lending in stages, which is the manifestation of the real estate loan concentration taking effect in substance. Under this premise, the RRR cut will not have a significant impact on the real estate credit environment.
Lowering the RRR or benefiting large-scale diversified housing enterprises
Jiang Han, a senior researcher at Pangu think tank, mentioned that it is helpful for real estate enterprises, especially large real estate enterprises, because many large real estate enterprises have diversified businesses, such as Evergrande, which is familiar to everyone, and Country Garden, which has a robot business. Because it is a diversified business system, although the funds for RRR reduction are difficult to enter the real estate business system, it is helpful to other real economies, so for real estate enterprises, it is entirely possible to obtain others through RRR reduction.
However, in the eyes of the industry, although this is a general decline, unlike the previous targeted cuts to required reserve ratios, there are more funds in the market, and the regulatory authorities will guard against other loan paths leading to the real estate market.
"The general tone of monetary policy will not change greatly, and it is impossible to change from a round of neutral tightness to looseness, and at most to a neutral width. At the same time, with the control of loan concentration, the trend of tightening real estate funds will not change. " Li Yujia, chief researcher of Guangdong Housing Policy Research Center, said.
The purpose of RRR reduction is clear
The relevant person in charge of the People’s Bank of China pointed out that the purpose of the RRR cut is to optimize the capital structure of financial institutions, enhance their financial service capabilities and better support the real economy. First, while maintaining a reasonable and sufficient liquidity, we will enhance the ability of financial institutions to allocate funds and create a suitable monetary and financial environment for high-quality development and supply-side structural reform. The second is to adjust the financing structure of the central bank, effectively increase the long-term stable sources of funds for financial institutions to support the real economy, and guide financial institutions to actively use the RRR cut funds to increase their support for small and micro enterprises. Third, the RRR cut will reduce the capital cost of financial institutions by about 13 billion yuan per year, which can promote the reduction of comprehensive social financing costs through the transmission of financial institutions.
Jiang Han believes that the purpose of the current RRR cut is actually very clear, mainly to support the development of the real economy and promote the overall improvement of China’s economy. Therefore, under such circumstances, maintaining a reasonable and sufficient liquidity will have a better accumulation support significance for effectively supporting the development of the entire China economy, which is the core logic of the current RRR cut.