Chinese Economics Thread

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antiterror13

Brigadier
Overbom said:
2015 was the stock crash. It was quite a big deal then
2017+ was the trade war.
2020+ was the pandemic

I am actually surprised that the RRR has remained so stable during the pandemic.
Anyway, with these 3 big developments it is justifiable that China cut its RRR

They are cutting it again due to the more than expected slowing down in the property sector. The policies for deleveraging the sector seem to have overshoot and there is a need to correct, otherwise the gdp growth (+ local gov tax revenues) would be overly affected
Click to expand...

12% RRR is very healthy and responsible. Canada, the UK, New Zealand, Australia, Sweden and Hong Kong[12] have no reserve requirements.

12% RRR means that, every $1 loan, the bank must hold 12c in the balance sheet, can't be use to give a loan, but my understnding is it can be deposited in the central bank, so still get some interest. In a way, there is some inefficiency there

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L

LesAdieux

Junior Member
antiterror13 said:
12% RRR is very healthy and responsible. Canada, the UK, New Zealand, Australia, Sweden and Hong Kong[12] have no reserve requirements.

12% RRR means that, every $1 loan, the bank must hold 12c in the balance sheet, can't be use to give a loan, but my understnding is it can be deposited in the central bank, so still get some interest. In a way, there is some inefficiency there

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Click to expand...

the weighted average rate at the moment is 8.4%. RRR is an obsolete monetary policy, should switch to shibor overnight rate. and anchor money supply to forex is even worse. it's time to use sovereign bond to create money supply. it's illegal to do that in China today.
 
W

W20

Junior Member
Registered Member
LesAdieux said:
the weighted average rate at the moment is 8.4%. RRR is an obsolete monetary policy, should switch to shibor overnight rate. and anchor money supply to forex is even worse. it's time to use sovereign bond to create money supply. it's illegal to do that in China today.
Click to expand...

This question is of great interest to me, I would appreciate it if you would expand this intricate theme
 
L

LesAdieux

Junior Member
W20 said:
This question is of great interest to me, I would appreciate it if you would expand this intricate theme
Click to expand...

thank you for your reply, I'll give it a try.

first about money creation or money supply. there're lots debate on this issue, anchor the RMB to the dollar, or anchor the RMB to RMB? currently China continues to use forex to create money supply, but most money supply is through the reduction of RRR. The standard method for advanced economy is anchoring the currency to its own sovereign bond. China's banking law forbids the financial ministry directly issue debt to the central bank. so it's nonsense to talk about China's QE.

The PBoC uses two benchmark rates to regulate the market: RRR and one year deposit/lending rate. these rates are not market driven.
 
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