The Economic Impact Of Frequent Increase In Deposit Reserve Ratio

This year, the central bank has raised the deposit reserve rate for the fifth time.

The frequency and intensity of this increase are very rare in the history of financial development in our country and even in the world.

People will ask, what is the deposit reserve ratio?

Why has China adjusted the deposit reserve rate so frequently in the near future?

How will the deposit reserve ratio affect China's macro-economic operation and our production and life?

With the deepening development of the socialist market economy, these problems have become the basic knowledge that every citizen needs to learn and understand, because it is closely related to our life.

The term "deposit reserve" refers to the funds prepared by financial institutions to ensure customers' withdrawal and capital settlement.

The ratio of deposit reserve required by the financial institutions to the central bank to the total amount of their deposits is the deposit reserve ratio.

The deposit reserve is divided into two parts: the statutory reserve requirement and the excess reserve. The deposit of the central bank is deposited as a "statutory reserve fund" at the prescribed rate, while the excess amount of deposits deposited by the financial institutions in the central bank exceeds the statutory reserve requirement.

Under the deposit reserve system,

In modern society

China's deposit reserve system was established after the people's Bank of China specialized in exercising the functions of the central bank in 1984.

In those days, the central bank laid down the statutory reserve requirement rate according to the type of deposit, 20% of enterprise deposits, 25% of rural deposits and 40% of savings deposits.

Because the reserve requirement ratio was too high, the funds of professional banks were seriously insufficient. Therefore, since 1985, the central bank has adjusted the required reserve ratio to 10%.

In September 2008, in order to support small and medium-sized financial institutions to pass the impact of the US subprime mortgage crisis smoothly, the central bank stipulated the required reserve ratio in accordance with the size of financial institutions.

The statutory reserve requirement ratio of small and medium-sized financial institutions dropped by 100 basis points to 16.5%, and the statutory reserve requirement ratio of large financial institutions remained unchanged at 17.5%.

In the fourth quarter of 2008, the central bank lowered the statutory reserve requirement ratio of large financial institutions and small and medium-sized institutions three times, respectively.

With the change of macroeconomic situation at home and abroad, the central bank has raised the required deposit reserve rate for 11 consecutive times since January 2010, of which the frequency rose in 2011.

The economic impact of frequent increase in deposit reserve ratio

1., the impact on China's current economic situation.

The central bank constantly raises the deposit reserve ratio, which aims at recovering liquidity, eliminating monetary factors of rising prices and controlling inflation.

After a recent adjustment, the one-time frozen bank funds reached about 370000000000 yuan.

And with the increase of the deposit reserve ratio, the cumulative effect of liquidity recovery will also gradually appear.

In 2011, as the opening year of 12th Five-Year, China's economic situation was optimistic.

The start of many major projects, as well as the country's increasing investment in emerging industries and the expansion of housing construction scale, will stimulate the demand for funds.

In the first quarter of this year, fixed asset investment (excluding farmers) completed 3 trillion and 900 billion yuan, an increase of 25% over the same period, and the growth rate was still at a relatively high level. The growth rate of short-term loans remained at a high level, the first quarter increased by 725 billion 300 million yuan, and in April it was 204 billion 300 million yuan, and the demand for mobile capital was strong.

These figures reflect the desire of enterprises for credit.

Against this background, the frequent increase in the deposit reserve ratio fully demonstrates the government's determination to curb inflation. It also conveys such information to commercial banks, that is, the state hopes that commercial banks should pay attention to controlling the scale of credit under the condition of strong credit demand, and combine the adjustment of credit structure with the adjustment and upgrading of the state industry in conjunction with the national "12th Five-Year plan".

2., the impact on commercial banks.

The impact of raising the deposit reserve ratio on commercial banks is mainly manifested in the following aspects.

On the one hand, the frequent increase in the deposit reserve ratio will result in the reduction of the credit space of commercial banks and make the growth of performance difficult.

China's commercial banking industry is mainly based on traditional business interest income. The increase in deposit reserve ratio means that banks will increase the amount of reserves deposited in the central bank, which will directly lead to the reduction of funds for loans.

Because commercial banks have the function of creating credit, commercial banks can actually reduce the amount of funds that can be used to create profits, which will be magnified more than the increased reserves.

At the same time, the increase of the deposit reserve ratio has reduced the excess reserves of commercial banks and reduced the amount of lending funds, resulting in the tension of the bank lending market and the phenomenon that individual banks' positions are negative and can not be paid.

At present, the rate of interbank lending rate is up to 9%, exceeding the lending rate of the 2008 global financial crisis and raising the cost of interbank financing.

On the other hand, raising the deposit reserve ratio is beneficial for commercial banks to improve the management level of funds and optimize the structure of assets.

After raising the deposit reserve ratio, commercial banks need to pay more deposit reserves to the central bank on the one hand. At the same time, in order to make up for the credit gap, they must increase interest payments to the central bank to refinance or repurchase the central bank bills. Therefore, the increase of the deposit reserve ratio objectively requires the commercial banks to use funds more flexibly, improve the efficiency of fund utilization, and help to raise the level of capital management of commercial banks.

At the same time, due to the increase of the deposit reserve ratio, the credit ability of commercial banks has declined, forcing commercial banks to issue loans more prudently. Some loans with high capital consumption, low economic value added and high risk coefficient have become the object of contraction first, not only without loans, but also to be withdrawn.

This has effectively promoted China's economic pformation and structural adjustment.

3., the impact on SMEs.

Lending is the most important financing channel for small and medium-sized enterprises in China.

The increase of the deposit reserve ratio has reduced the credit ability of commercial banks, thus lending more prudently and even "reluctant to lend", which will further increase the financing difficulty of SMEs.

The impact of raising the deposit reserve ratio on SMEs is mainly manifested in the following aspects.

First, some enterprises' capital chain is tight, and they are in danger of losing money or even closing down.

With the increase of RMB exchange rate and the increase of labor costs, the profitability of some small and medium-sized enterprises has declined. According to a survey conducted by the Ministry of industry and information, in the first two months of 2011, the loss of small and medium-sized enterprises above Designated Size reached 15.8%, an increase of 0.3% over the same period, and a growth rate of 22.3% of losses.

With the decline of corporate profits, the tightening monetary policy to raise the deposit reserve ratio will cause some enterprises to have a tight chain of funds, resulting in loss or even bankruptcy.

Two is to increase the difficulty of enterprise loans and increase the cost of enterprise loans.

Raising the deposit reserve rate again will restrain the loan of commercial banks.

Even when monetary policy is loose, bank credit rarely benefits small and medium-sized enterprises. Under the background of tight credit, SMEs are often the first ones to be tightened up.

At the same time, the increase of the deposit reserve rate will also lead to some loan interest rates raised, and the cost of growth has already been increased.

The three is to increase the cost of capital utilization.

According to the results of a sample survey of 350 enterprises by Wenzhou finance office, the proportion of the three funds of the enterprise's operating capital at the end of the first quarter was 56:28:16, the proportion of bank loans decreased by 2 percentage points compared with the same period last year, and the proportion of private lending increased by 6 percentage points over the same period last year.

On the basis of continuously increasing the reserve requirement ratio, the interest rate of private lending rose.

4., the impact on the real estate market.

Under the background of intensive market regulation policies, raising the deposit reserve rate again will undoubtedly cause greater financial pressure on the real estate market.

First, the implementation of the regulation and control of the property market has been intensified.

Monetary policy is the key factor affecting the regulation of the property market. Compared with the previous two rounds of regulation, the third round of regulation and implementation is even greater.

In addition to the restriction orders issued everywhere, the monetary authorities have carried out credit control through frequent increase in the deposit reserve ratio, interest rate increase and the reduction of interest rate concessions, so that commercial banks have suppressed the housing loans to the real estate enterprises and made the implementation of the current property market control policy more forceful.

Two, we will continue to curb banks' loans to real estate.

The central bank's credit crunch policy has the biggest impact on the real estate industry.

For a long time, the main financing channel of China's real estate enterprises is bank loans. After a month, the central bank once again raised the deposit reserve ratio. It is also a warning of the central bank to commercial banks. It hopes that commercial banks will curb the impulse of mortgage loans and control the scale of lending.

The three is to increase the utilization cost of developers.

According to the annual report of 74 A share listed real estate companies as at April 1st, the total cash flow value was -701.67 billion yuan. Last year, the cash flow of these 74 companies was 35 billion 756 million yuan, down 296.24% from the same period last year. The total inventory in the balance sheet was 723 billion 729 million yuan. Last year, the inventory of these companies was 511 billion 19 million yuan, an increase of 41.62% over the same period last year.

The sharp decline in cash flow and the marked increase in inventories have proved that the pressure of financial pressure on developers has gradually increased recently.

Four is to increase the difficulty of housing loans and repayment pressure.

In the context of the gradual and clear impact of the current market regulation policy, banks will tighten their loans to the real estate industry continuously after raising the deposit reserve for several times. At the same time, some cities have appeared to suspend the purchase of housing loans or suspend some housing loans. This situation is still spreading. It is more and more difficult for homebuyers to borrow from banks.

At the same time, for the buyers, the increase of the deposit reserve rate means that it is more difficult to obtain housing loans, and the cost is also greatly improved.

5., the impact of personal finance.

Theory and practice show that when the per capita income is above 3000 dollars, the sense of financial management of residents begins to increase.

At present, China's per capita income has reached 4000 US dollars, and CPI remains high, and deposits continue to have negative interest rates. In order to realize the value added and maintenance of assets, residents have the need and willingness to manage money.

The central bank's monetary policy is related to thousands of households, which is related to the preservation and increment of funds in each of us.

Its influence on personal financial management is mainly reflected in the following aspects.

First, the impact on the stock market.

Raising the reserve rate will cause a short-term impact on the market, increase the difficulty of the upside, and have a negative impact on the stock market.

China's stock market is not only influenced by the domestic capital market, but also deeply influenced by the international capital market.

In the context of globalization, cross-border capital flows are faster and more convenient.

Since 2010, the trend of China's stock market has basically coincide with the trend of international capital inflow.

In the short term, China will adopt a prudent monetary policy to recover liquidity in the market by raising the deposit reserve ratio, which will restrain the stock market to a certain extent.

The global economic recovery has been slow due to multiple factors such as debt restructuring in Europe, sluggish recovery in the United States and Japan earthquake. But the emerging market economies have maintained strong momentum and attracted a lot of hot money, especially in China.

Therefore, raising the deposit reserve ratio will help reduce the pressure of RMB appreciation and help reduce the large inflow of hot money, which will also affect the stock market to a certain extent.

The two is the impact on financial products.

After raising the deposit reserve rate several times, the deposit reserve rate of large financial institutions increased to 21%, and the deposit reserve ratio of small and medium-sized financial institutions rose to 17.5%, resulting in many banks being very tight at present and liquidity management facing great challenges.

With the central bank tightening monetary policy and reducing personal deposits, various financial institutions have been attracting investors to buy financial products through innovative financial products, so as to reduce the tight funding situation.

6., the impact on the stability of the international economy.

Since the financial crisis, in the background of the implementation of quantitative easing monetary policy in developed economies, the weakening trend of the US dollar still exists.

Especially since the Sino US Strategic Economic Dialogue in May, the pressure on RMB appreciation is expected to be greater.

We choose to raise the deposit reserve ratio instead of raising interest rates, which can better cope with the inflow of hot money and reduce the appreciation of the renminbi.

This will surely have a positive impact on stabilizing the international economic development.