The downward pressure on China's economy has increased, and the Chinese leadership has repeatedly urged "steady growth"; in terms of monetary policy, the People's Bank of China has reduced the loan interest rate to a record low through various monetary policies such as lowering the deposit reserve ratio and interest rates.
However, from financial data in recent months, corporate borrowing demand is still hovering at a low level.
Even though the new loan data in May exceeded expectations, from the breakdown of the data, it was mainly driven by short-term loans.
Analysts believe that companies have not dared to draw long-term loans, reflecting their lack of confidence in the economic outlook and their reluctance to resume investment.
Even in the housing market that has begun to loosen, the data on residents' medium and long-term loans related to building mortgages was still under pressure last month, which shows that residents have not yet regained their desire to enter the market.
On June 20, the People's Bank of China announced the loan market quoted interest rate (LPR). The one-year and five-year interest rates remained unchanged at 3.7% and 4.45%, respectively.
(Visual China)
The market is concerned about whether the mainland's traditional financial tactics such as interest rate cuts and RRR cuts are not enough to save the economy.
Tao Dong, Managing Director of Credit Suisse Asia Pacific Private Banking and Vice Chairman of Greater China, believes that over the years, the mainland government has controlled the economy by controlling the credit gate.
In short, when the economy is overheating, officials tighten credit; when the economy is down, they encourage loan growth.
Therefore, in the past, there was a description of the mainland's economic policy, which is "if you manage it, you will die, and if you let it go, you will be in chaos."
The challenge now, however, is that even with the PBOC's stimulus policies, the so-called "chaos", the surge in credit, has not occurred.
Judging from the current financial data, corporate demand remains sluggish, a situation not seen in many years.
It can be seen that, in the past, the government's incentive loan tool does not seem to be very efficient in the current economic environment.
Asked about the reasons for the sluggish private loan investment, Tao Dong believes that it is related to the economy falling into a "liquidity trap".
He explained that this is a concept from the neoclassical economics master Keynes, which means that when the monetary environment has reached an era of extreme easing, when companies' expectations for the future change, no matter how much the central bank expands credit, it cannot stimulate bank loans. , business investment, personal consumption, etc.
This may be the problem facing China's economy now.
Tao Dong believes that over the years, the mainland government's economic regulation and control method has mainly been to control the credit gate.
(Photo by Zhang Haowei)
Tao Dong cited the recent relaxation of mortgage lending in mainland China as an example. At present, the public's belief in "property prices only rise and not fall" has been broken. Even if banks reduce mortgage interest rates, it will not be enough to increase consumption all at once.
Therefore, to stabilize the current economic situation, we cannot rely on any monetary policy alone. The key is to restore market confidence.
For details, please read "Hong Kong 01" Electronic Weekly Issue 322 (June 20, 2022) "
Tao Dong: The Global Economy is in a "Year of Dislocation", China and the U.S. Are Facing Challenges
".
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