20180502-兴业研究-RRR_Cut_Not_Suggesting_Turnaround_in_Monetary_Policy_10页_1mb

RRR Cut Not Suggesting Turnaround in Monetary Policy

Core Content

This report provides an analysis of China's macroeconomic indicators and monetary policy stance in April and May 2018. Despite an unexpected targeted RRR (Reserve Requirement Ratio) cut in April, the PBOC (People's Bank of China) is expected to maintain its current monetary policy stance. The report outlines the performance of various economic indicators, including industrial output, GDP, inflation rates, and financial metrics, based on historical data and current market conditions.

Main Points and Key Information

Economic Growth in April

• Industrial Value Added (IVA): Likely increased by 6.1% y/y, up 0.1 percentage point from March, driven by a rebound in export performance.
• GDP Growth: No specific figure provided, but data suggests a stable growth trend, with 6.8% in March and December 2017.
• Export Growth: Rose sharply by 12.0% y/y in April, supported by higher industrial production and preemptive shipment by exporters due to trade tensions with the U.S.
• Import Growth: Increased by 16.0% y/y, up 1.6 percentage points from March, due to rising CRB Spot Market Price Index and increased downstream demand.

Inflation Trends

• PPI (Producer Price Index): Expected to rise to 3.5% y/y in April, up 0.4 percentage points from March, driven by higher crude oil prices and a low base effect.
• CPI (Consumer Price Index): Likely fell to 1.7% y/y in April, down 0.4 percentage points from March, due to falling pork and vegetable prices, and the base effect on medical care CPI.

Financial Indicators

• M1 Growth: Declined to 6.8% y/y, down 0.3 percentage points from March, impacted by slower property sales.
• M2 Growth: Rose to 8.4% y/y, up 0.2 percentage points from March, due to the base effect.
• New Loans: Estimated at 900 billion yuan in April, 220 billion yuan less than in March, reflecting a continued decline in loan issuance.
• Credit Growth: Slowed to 12.5% y/y in April, down slightly from March.
• Total Social Financing: Estimated at 1.10 trillion yuan in April, down 0.23 trillion yuan from March, due to reduced liquidity.

Monetary Policy

• RRR Cut: The targeted RRR cut in April was not seen as a signal of a policy turnaround, as the PBOC maintained a tight liquidity stance.
• DR007 (7-day repo rate): Expected to drop to 2.83% in May, down 1 basis point from April.
• SHIBOR 3M: Projected to rise to 4.20% in May, up 5 basis points from April, reflecting tighter liquidity for non-bank financial institutions.
• Liquidity Injection: The PBOC injected relatively small amounts of liquidity during the mid-month tax collection season, indicating a continued tight monetary policy.

Policy Priorities

• The Chinese government emphasized improving the structure and quality of economic development in the CPC Politburo meeting.
• The RRR cut was aimed at supporting the crackdown on shadow banking, rather than signaling a shift in monetary policy.

Conclusion

The report highlights that while some economic indicators showed improvement in April, such as export growth and PPI, others like CPI and M1 growth remained subdued. The targeted RRR cut did not indicate a shift in the PBOC's monetary policy stance, which is expected to remain tight. The focus is on maintaining financial stability and improving the structure of economic development.