Goldman Sachs comment on China’s overall RRR cut: important changes in monetary policy stance

Goldman Sachs comment on China’s overall RRR cut: important changes in monetary policy stance
Abstract: Goldman Sachs believes that although this gradual reduction of China ‘s quota will only have a very short-term impact on the overall economy, this may be an important signal to the market that changes in monetary policy stance.  Last Friday, the US stock market was filled with optimism. The Dow rose 600 points, the Nasdaq rose more than 200 points, and FAANG and Tesla rose more than 3% across the board.  The market trend is attributed to strong non-agricultural data in the United States and Powell’s distribution of pigeons, but it is undeniable that the news of China’s comprehensive and comprehensive RRR cut also played an important catalytic role in this optimism.  Goldman Sachs pointed out in its latest report that even the overall implementation of China ‘s overall RRR cut policy is not large, but may be an important signal to the market that changes in monetary policy stance.  On January 4, the People’s Bank of China announced that it would soon reduce the deposit reserve ratio to 0 on January 15 and January 25, respectively.Five single, meanwhile, MLF will no longer continue to be terminated in the first quarter of 2019, and said that this arrangement promotes financial institutions to continue to increase support for small and micro enterprises, private enterprises, and hedge liquidity before the Spring Festivalfluctuation.  In this 无锡桑拿网 regard, Goldman Sachs commented that from a quantitative perspective, this targeted measure is cumulative, but the scale is not particularly large, because monetary statutory has recognized that monetary easing of scale may bring continuous risks to the system.At the same time, Goldman Sachs believes that even this long-term RRR cut in China will at best have a very short-term impact on the overall economy, but it may convey a change in monetary policy stance.Important evidence emerged in December last year, when the Central Economic Working Conference pointed out that China will continue to implement a proactive fiscal policy and a prudent monetary policy, in which the word neutral was removed from the description of monetary policy and turned into moderation.  Finance blog ZeroHedge pointed out that this description is very 南京桑拿网 similar to the successive easing attitudes shown by various countries after the G20 transitional governor and finance minister meeting in Shanghai Antique in early 2016, after which China, Europe.At that time, market participants speculated that during the summit, progressive policymakers from various countries secretly reached an agreement to jointly implement monetary easing and reduce the dollar exchange rate.  (Source: CEIC, Goldman Sachs) Similar to the “Plaza Agreement” of the 1980s, this secret agreement was called “Shanghai Agreement” by the market at that time.But soon, some voices said that this was just a conspiracy theory of the market, and the Shanghai Conference re-established any agreement that could directly intervene in exchange rate changes.The China Finance Forty Forum article states that the truth is more likely to be between “with an agreement” and “without an agreement”, which can be called “Shanghai tacit agreement”.  According to Xinhua News Agency, Yi Gang, then the vice-president of transition, stated that the G20 countries will continue to communicate on monetary policy direction and market trends in the future, which will surprise other countries.  Source: Wall Street News