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Here’s what you need to know about China in the past 24 hours China economic news.
China’s central bank is expected to reduce the reserve requirement ratio (RRR) as early as this Friday to help bolster the economy under strain from Covid lockdowns, a regular cabinet meeting hinted on Wednesday.
China will use policy tools, including RRR cuts in a timely way, to support the real economy, especially industries and small firms hit by the COVID-19 pandemic, and will lower financing costs, according to the State Council’s Executive Meeting chaired by Premier Li Keqiang.
The two previous RRR cuts, in July and December last year, came days after a similar signal. As analysts expect RRR cuts on Friday, they hold that the central bank is not as likely to cut the rate on its medium-term lending facility (MLF) as surging bond yields in the United States have narrowed the space for China to cut interest rates.
Wednesday’s meeting also decided on greater policy support to boost consumption. Consumption in key areas should be expanded, said the Premier, adding that consumption in the service sectors, such as medical, health, elderly and child care, should be propelled, and spending on automobiles and home appliances should be encouraged.
China will also step up export tax rebates to stabilise foreign trade, said the meeting. Li stressed increasing export tax rebates to promote foreign trade development, adding that the business environment for foreign trade will be improved on multiple fronts.
The National People’s Congress will mention "RRR cut" again, and the market expects that the central bank may announce specific RRR cut measures this Friday.
On April 13th, Li Keqiang, Premier of the State Council of the People’s Republic of China presided over the the State Council executive meeting to deploy policy measures to promote consumption, help stabilize the basic economy and ensure the improvement of people’s livelihood. Decided to further increase export tax rebate and other policy support to promote the steady development of foreign trade; Determine measures to increase financial support for the real economy and guide the reduction of financing costs for market participants.
The meeting decided to encourage large banks with high provision levels to reduce the provision ratio in an orderly manner in view of the changes in the current situation, and timely use monetary policy tools such as RRR reduction to further increase financial support for the real economy, especially industries seriously affected by the epidemic, small and medium-sized enterprises and individual industrial and commercial households, make reasonable profits to the real economy and reduce comprehensive financing costs.
In the past three years, the RRR cut was generally announced by the National People’s Congress first, and then the central bank announced the RRR cut measures within one week, and the announcement time was usually on Friday. After the statement of the National Standing Committee, the market expects that the central bank may announce specific RRR reduction measures this Friday.
It is worth noting that the central bank will conduct MLF operations this Friday, and the market is highly concerned about whether the MLF interest rate will be adjusted. According to the analysis, the Fed is in the interest rate channel, the spread between China and the United States has been upside down, and the space for interest rate reduction is limited. The probability of MLF’s interest rate cut in April is low.
The regular meeting of the State Council also deployed policy measures to promote consumption and promote the steady development of foreign trade.
The meeting pointed out that consumption has a lasting driving force for the economy and is related to ensuring the improvement of people’s livelihood. It is necessary to expand consumption in key areas, promote consumption in medical care, old-age care and childcare, and support social forces to make up for the shortcomings in service supply. Large-scale consumption of automobiles and household appliances is encouraged, and no new measures to restrict purchases of automobiles are allowed in all localities. Incremental targets for gradually increasing purchases have been implemented. Support the consumption of new energy vehicles.
In addition, the meeting pointed out that in order to promote the steady development of foreign trade, it is necessary to give full play to the policy effect of export tax rebate, which is inclusive, fair and in line with international rules, and optimize the foreign trade business environment.
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