Yi Gang: China has the conditions to implement normal monetary policy and does not currently need to implement asset purchase operations

Chinese peopleBankPresident Yi Gang recently published a titled “China’sinterest rateSystem andinterest rate“Market Reform” article. The article stated that interest rates are an important macroeconomic variable, and interest rate liberalization is one of the core reforms in the economic and financial sector. After more than 30 years of continuous advancement, my country’s interest rate market reform has achieved remarkable results. A relatively complete market-based interest rate system has been formed, and the yield curve has also matured, creating favorable conditions for the important adjustment function of interest rates to macroeconomic operations. .

About the generalcurrencyPolicy and non-traditional monetary policy, the article said, asset purchase tools are not conventional monetary policy tools, but the central bank’s forced choice when market problems arise. China’s potential economic growth rate is still expected to remain in the range of 5% to 6%. If conditions are allowed to implement normal monetary policies, the yield curve can also maintain a normal and upward sloping pattern. China will extend the time it takes to implement normal monetary policies as much as possible, and there is no need to implement asset purchase operations at this time.

The article stated that it is more reasonable for the real interest rate r to be slightly lower than the actual economic growth rate g on the whole. According to empirical data, the real interest rate in my country is lower than the actual economic growth rate for most of the time. This practice can be called retention Optimal strategy with leeway. However, r cannot continue to be significantly lower than g. If the interest rate is too low for a long time, it will distort the allocation of financial resources, causing problems such as excessive investment, overcapacity, inflation, asset price bubbles, and capital idling. The ultra-low interest rate policy is difficult to sustain for a long time.

In the part of explaining the interest rate corridor, the article stated that the volatility of short-term interest rates is limited to a reasonable range through the assistance of the interest rate corridor with the standing lending facility (SLF) interest rate as the upper limit and the excess reserve interest rate as the lower limit.Recently, the peopleBankPromote the reform of SLF electronic operation mode, and realize the orderly realization of the whole process electronic, which is conducive to improving operation efficiency, stabilizing market expectations, and enhancingBankThe stability of the system’s liquidity, maintaining the stable operation of money market interest rates, and effectively preventing liquidity risks.

The article stated that the People’s Bank of China will continue to deepen the reform of interest rate marketization in accordance with the strategic deployment of the Party Central Committee and the State Council, and strive to improve the market-based interest rate formation and transmission mechanism. We must continue to improve the central bank’s policy interest rate system. Continue to consolidate the central bank policy interest rate system with open market operating interest rates as short-term policy rates and medium-term lending facility (MLF) interest rates as medium-term policy rates. The ideal state is that market interest rates fluctuate around the policy interest rate as the center. Efforts will be made to improve the interest rate corridor mechanism, and orderly realize the electronicization of the whole process of SLF operation. We must continue to strengthen the cultivation of market benchmark interest rates. Optimize the loan market quotation rate (LPR) quotation formation mechanism, urge quotation banks to improve the quality of quotations, evaluate quotation banks and implement the survival of the fittest, and publish historical LPR quotations in a timely manner.expandRepurchaseThe use of interest rate DR in financial products further consolidates the benchmark of DR. Cultivate the yield curve of treasury bonds in accordance with the principles of marketization.

The article emphasizes that interest rate marketization must be “open” and “formable.” An important contradiction in the current deepening of the reform of interest rate marketization is that market-based interest rates have obstacles to “formation” and transmission. The reasons include market segmentation caused by regulatory arbitrage and immature financial markets, as well as soft budget constraints of financing platforms, and deposits. Financial and financial system issues such as disorderly competition. In the next stage, we must continue to strengthen supervision, optimize the business environment, harden budget constraints, and resolve financial risks, so as to provide more favorable conditions for further deepening the reform of interest rate marketization.

(Source: Shanghai Securities News)

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