There were 7 signals from Lujiazui

Wu Xiaobo Channel

2024-06-20 09:00Posted on the official account of Zhejiang Hangzhou Bajiuling Cultural and Creative Co., Ltd

"Ordinary people pay attention to this conference, the first step can be to look forward to the specific system, and the second step is to observe the momentum and direction of policy efforts."

Text / Ba Jiuling (WeChat public account: Wu Xiaobo channel)

On June 19, the two-day 15th Lujiazui Forum officially kicked off.

Judging from the number of sessions, it is hard to imagine that this forum, which was only out of the circle a few years ago because of the well-known "celebrity speeches", has been held for 15 years.

It was born in July 2008, when the "black swan" was flying. At that time, the other side of the ocean was in shambles, and the subprime mortgage crisis was still being transmitted to the depths; As the first echelon of national top students, Shanghai's GDP growth rate is lower than the national average for the first time, and it is about to fall into single digits for the first time in 17 years.

Go to the poor place of the water, and sit and watch the clouds rise. Since the reform and opening up, Shanghai's ambition is to become the "third time zone" of world finance in addition to London and New York, and this goal hit the accelerator button in 2008.

The Lujiazui Forum was born in this context. The builders hope that by setting up a national forum, Shanghai will enhance its influence as an international financial center and create a new image and brand.

Over the past 15 years, it has become a frontier built on the banks of the Huangpu River to transmit and absorb the latest financial trends to the world, and it is also one of the highest-level annual events in China's financial circles.

According to Ma Hongman, a financial commentator at the conference, the Lujiazui Forum is co-sponsored by the Shanghai Municipal Government, the Central Bank, the State Administration of Financial Supervision (formerly known as the China Banking Regulatory Commission and the Insurance Regulatory Commission), and the China Securities Regulatory Commission.

The other participants were mainly top financial institutions from all over the world, with half domestic and international guests, such as several major state-owned banks, iconic joint-stock banks, and heads of influential financial and investment institutions around the world as panelists. The on-site guests were mainly major financial institutions, entity enterprises, and scientific and technological innovation enterprises.

Since the forum has a link for the heads of relevant departments to publicize policies and intentions, many blockbuster policies or intentions have the opportunity to "debut" in Lujiazui. Over the years, the Lujiazui Forum has played the role of a "signal transmitter" many times, so it has attracted great attention every year.

Before this year's meeting, there was frequent news that from the central bank to the China Securities Regulatory Commission, there will be blockbuster policies.

Because of this, the period from 9:00 a.m. to 11:00 a.m. yesterday attracted the most shots and attention.

In the past two hours, Pan Gongsheng, governor of the People's Bank of China, Wu Qing, chairman of the China Securities Regulatory Commission, and Li Yunze, director of the State Financial Supervision and Administration Bureau, delivered keynote speeches respectively.

Frankly, these are three speeches that are not easy to understand, there are a lot of difficult financial terms, but the message is important.

For example, Pan Gongsheng, governor of the central bank, made a speech of more than 4,700 words, but "unexpectedly" gave a comprehensive explanation of the theoretical framework of the central bank's monetary policy regulation and control, and talked about the future changes of the central bank in the "way of printing money" and "cutting interest rates".

Wu Qing, chairman of the China Securities Regulatory Commission, made a speech of nearly 2,600 words, and in Ma Hongman's view, his speech hit the core point of the entire capital market.

Li Yunze, director of the State Administration of Financial Supervision and Administration, made a speech of about 3,800 words, which was also the first time that the person in charge of the State Administration of Financial Supervision appeared at the Lujiazui Forum just after the establishment of the State Financial Supervision and Administration last year.

The market and the audience paid more attention to the speeches of Chairman Wu Qing and President Pan Gongsheng.

Chairman Wu Qing has faced pressure and challenges in the capital market since taking office in February this year, and the audience and the market hope to read about his policy measures to maintain market stability.

At the same time, the year-on-year growth rate of total social financing and M2 in May was lower than market expectations, and the growth rate of M1 was negative for two consecutive months.

Ma Hongman said: "For ordinary people, the first step to pay attention to this conference is to look forward to specific systems, the second step is to observe the momentum and direction of policy efforts, and the third step is to judge when it can be transformed into the optimization of macroeconomic indicators." ”

Next, we tried to draw some key points in this information, and invited Xue Qinghe, president of Zhiben Agency and deputy director of the Institute of Macro Strategy of the Chief Center, Dong Yizhi, a financial lawyer and Shanghai Zhengce Law Firm, Liu Xiaobo, a financial commentator, Ma Hongman, a financial commentator and a researcher at the think tank of the China Economic Research Center of Fudan University, and Xu Zhaohua, the founder of Heheng Consulting and an expert in the market value management of listed companies, to express some views on this.

monetary policy

Keyword 1:

Redefining M1

Pan Gongsheng: The mainland's M1 statistical caliber was established 30 years ago...... From the perspective of monetary function, personal demand deposits and some financial products with high liquidity or even direct payment functions need to be included in the scope of M1 statistics to better reflect the real situation of money supply.

Liu Xiaobo: M1 is made up of cash in circulation and corporate demand deposits, which are the money that can be used immediately when companies increase their investment. As for time deposits, they need to be converted into demand deposits before they can be invested, so they are not included. An important variable in M1 is the company's demand deposit.

When a company is ready to expand its investment, it will turn its regular term into a current account; On the contrary, when the market is not good and enterprises are unwilling to invest, they will turn current to fixed, which is manifested in the decline of M1 year-on-year growth.

Pan Gongsheng means that personal demand deposits can also be consumed and invested at any time, so it should be included in M1 first, not before, and will be included later. In addition, "some financial products with high liquidity or even direct payment functions" should also be counted in M1. For example, the money of the third-party payment platform that enjoys regular interest but can be accessed at any time should be included.

The year-on-year growth rate of M1 (narrow money) is a "financial indicator" that investors are very concerned about. Otherwise, it will continue to be sluggish.

If the statistical scope of M1 changes, its total volume and growth trend will also change greatly. This is just like the stock exchange revising the index calculation method, delaying the inclusion of new stocks, which is conducive to eliminating the factors of high opening and low moving of new stocks, so that everyone can see a "better" index, which is conducive to building confidence in the property market and the stock market.

Keyword 2:

Financial aggregates remove the "scale complex"

Pan Gongsheng: In the future, we can continue to optimize the intermediate variables of monetary policy and gradually dilute the focus on quantitative targets. When the growth of money and credit has changed from a supply constraint to a demand constraint, if the focus of attention is still on the growth of quantity, or even if there is a "scale complex," it is obviously contrary to the law of economic operation.

Xue Qinghe: At present, the central bank of China's monetary policy adopts a parallel method of quantitative and price-based regulation and control, and the future direction is to adjust from quantity to price.

The so-called quantitative regulation refers to the monetary policy with the amount of money (usually M2 as the indicator) as the intermediary goal, and the central bank increases or decreases the amount of money to achieve the ultimate goal (controlling inflation and full employment). From 1970 to 1992, the Fed used quantitative control tools.

The so-called price-based regulation refers to the fact that the monetary policy takes the short-term interest rate (usually the overnight lending rate as the index) as the intermediary target, and the central bank adjusts the short-term interest rate to affect the interest rates of different markets, different varieties and different maturities, so as to achieve the ultimate goal.

In 1993, the Fed's monetary policy shifted from quantitative to price-based control. Today, the central banks of advanced economies such as the United States, the United Kingdom, Japan, Canada, and Europe are mainly price-based controls.

It is the general trend of modern monetary policy to adjust from a quantitative to a price-based one. Many of President Pan Gongsheng's speeches at the forum are related to this main line:

For example, it is pointed out that breaking the "scale complex" is actually a change in the thinking of quantitative regulation.

He believes that the total amount of money is sufficient today, the current stock of social financing exceeds 390 trillion yuan, the balance of M2 exceeds 300 trillion yuan, and the total scale of macro finance is already very large, and it is very difficult to maintain the growth rate of all credit at more than 10 percent as in the past.

It can be speculated that the central bank will cut interest rates in the future, but the intensity of interest rate cuts is limited, and it is unlikely that interest rates will be cut quickly.

Another example, "the key is to improve the transmission efficiency of monetary policy", which is also the thinking of price-based regulation.

In general, price-based regulation is more sensitive and efficient than quantitative regulation. For example, the mandatory reserve ratio is reduced by 0.25 percentage points, and the medium- and long-term liquidity released will exceed 500 billion yuan. This kind of regulation is inflexible, and now European and American countries have basically withdrawn from the mandatory reserve system and adopted the voluntary reserve system.

A voluntary reserve system is a price-based instrument, such as the Federal Reserve's cap on the federal funds rate, which is the interest rate on reserve balances. The Fed controls the federal funds interest rate by adjusting the interest rate on reserve balances and the overnight reverse repo offer rate (lower bound), which in turn affects interest rates across the market.

Banks, enterprises, and residents can decide on the allocation of funds according to the level of interest rates and expectations. Price-based instruments are more flexible, and monetary policy is more efficient.

Price-based regulation is not easy to set up, and requires a number of conditions: price-sensitive financial markets, a well-developed yield curve, and transparency and effective expectation management of central banks' monetary decisions. On this basis, the market has formed a stable expectation of the central bank's monetary policy, showing the characteristics of self-realization, and the monetary policy can achieve twice the result with half the effort.

Keyword three:

The number one policy rate has changed hands

Pan Gongsheng: In the future, we can consider making a short-term operating interest rate of the central bank the main policy rate, and at present, the 7-day reverse repo operation rate has basically assumed this function. The interest rates of other maturities monetary policy instruments can dilute the color of the policy rate and gradually straighten out the transmission relationship from short to long.

Liu Xiaobo: Before August 2019, China's interest rate cuts or interest rate cuts were carried out through the central bank's "two tables" of benchmark deposit interest rates and benchmark loan interest rates, which were highly prescriptive. However, developed countries have generally realized the marketization of interest rates, and the central bank only announces a simple short-term policy interest rate to guide the interest rate on deposits and loans.

After August 2019, the People's Bank of China (PBOC) carried out the LPR (Loan Prime Rate) reform. Since then, the central bank has no longer announced its benchmark interest rates (loans and deposits) and has instead used the monthly medium-term lending facility (1-year MLF) as its top policy rate.

On the 15th of each month (postponed accordingly on holidays), the central bank releases the MLF bid rate. This interest rate has become the most important reference for the LPR interest rate announced on the 20th of each month. The LPR interest rate is the benchmark interest rate calculated and released by the "National Interbank Funding Center" authorized by the central bank, quoted by 18 banks (later increased to 20), and then averaged after removing the lowest price and the highest price.

Since then, the LPR has become the new benchmark rate, and banks have used it as a reference for their deposit and loan rates. There are two types of LPR interest rates: 1-year and 5-year.

According to the central bank's governor's latest statement at the Lujiazui forum, the status of the MLF rate as the number one policy rate will be abolished, and it is likely that the "7-day reverse repo operation rate" will be used instead, so that China's interest rate will be more flexible.

MLF is only conducted once a month, and there is not enough flexibility to signal interest rate cuts or rate hikes. The 7-day reverse repo is carried out every working day, and the signal of interest rate cut (or interest rate hike) can be transmitted at any time if needed.

It is worth mentioning that Pan Gongsheng also said that "focus on improving the quality of LPR quotations to more truly reflect the interest rate level of the loan market". This sentence means that there is more room for LPR interest rate cuts.

Keyword four:

China's version of "quantitative easing"?

Pan Gongsheng: In recent years, the conditions for the central bank to release base money through the buying and selling of treasury bonds in the secondary market have gradually matured. It should be noted that the inclusion of treasury bond trading in the monetary policy toolbox does not mean that quantitative easing is to be carried out, but rather that it is positioned as a channel for the delivery of base money and a liquidity management tool.

Liu Xiaobo: From the beginning of the reform and opening up to 2014, China's base currency was put into (printing) money in the form of "foreign exchange appropriation", that is, the state printed money and bought the surplus (foreign currency) generated in foreign trade activities. Since there was too much surplus at that time, a lot of money was printed; In order to control inflation, we had to continuously raise the reserve requirement ratio, which was once raised to about 22%.

In recent years, the central bank has gradually released the over-issued currency through the "RRR cut". In addition, money is also printed through medium-term lending facilities, collateral supplementary loans, standing lending facilities, reverse repos, etc. These methods of money printing give priority to large state-owned banks for incremental, low-interest money to support national strategies. The main ones who receive money printing dividends (mainly interest differentials) are large state-owned banks and supported industries and enterprises (such as agriculture and scientific and technological innovation).

According to the People's Bank of China Law, the central bank cannot buy government bonds directly from the Ministry of Finance or underwrite government bonds, in order to avoid the impression that the central bank directly prints money to the treasury, triggering inflation expectations. But the law allows the central bank to buy and sell Treasury bonds on the secondary market. Its essence is not much different from buying directly from the Ministry of Finance, both of which are printing money to the finance, one is direct and the other is indirect.

In the future, after the normalization of the purchase of treasury bonds, the central bank will, like the Federal Reserve, buy treasury bonds when it increases monetary supply to achieve "balance sheet expansion"; On the other hand, when it is necessary to tighten the currency, it sells government bonds and "shrinks the balance sheet". Buying government bonds is equivalent to printing money to the treasury.

The change of the central bank's base currency implies two meanings: first, the currency anchor of the RMB was mainly the US dollar before, and the future will be "treasury bonds + gold"; Second, in the past, money printing was given priority to large banks and policy-supported industries (equivalent to injecting profits), and in the future, it will be given to the treasury.

Xue Qinghe: The change in the way Governor Pan Gongsheng talked about is that the central bank will increase the purchase and sale of treasury bonds as a monetary policy tool, which is not a Fed-style quantitative easing, it may be used as a routine open market operation.

In normal times, price-based tools are efficient, but in extraordinary times, if price-based tools fail, central banks will use quantitative tools. For example, in the event of a financial crisis, when the Fed is unable to reverse the situation by lowering the federal funds rate to near zero, quantitative easing may be used.

Interest rates are conventional and price-based tools, while quantitative easing is an extraordinary measure implemented when interest rates fall to zero, and are quantitative instruments.

The main purposes of central bank bond purchases may be:

◎First, we will provide support for government bonds and financing.

Second, we will add and expand the market of new base currencies to improve the transmission efficiency of monetary policy.

Third, improve the yield curve and create conditions for the establishment of a price-based modern monetary policy.

capital market

Keyword 1:

The "Eight Articles of the Science and Technology Innovation Board" were implemented

Wu Qing: We will release eight measures to deepen the reform of the STAR Market, further highlight the "hard technology" characteristics of the STAR Market, and improve the institutional mechanisms such as issuance and underwriting, mergers and acquisitions, equity incentives, and transactions, so as to better serve scientific and technological innovation and the development of new productive forces.

Ma Hongman: The market believes that in today's speech by the securities regulatory department, there should be very specific and significant positive landing, such as more specific news such as news similar to the equalization fund, restrictions on quantitative trading, and lowering the threshold for entering the science and technology innovation board, but in fact, some expectations have been disappointed.

In my opinion, the market's excessive expectations for the landing of major benefits are a misjudgment of the tone and logic of the conference speech. For entrepreneurs and investors, this conference is just the beginning, and there will be more market signals to be revealed with the participation of the vice chairman of the securities regulatory department in the discussion and a number of plenary meetings.

Dong Yizhi: In recent years, the development of the Science and Technology Innovation Board, which carries the historical mission, has been different from everyone's expectations, and there have been financial corruption problems at the exchange and regulatory levels in the middle.

Moreover, in order to strengthen patient capital, in addition to the rule of law as a premise, there must also be certainty, and it is necessary to strengthen the details and professionalism of supervision.

Regulation itself requires technology and cost, and with reference to international experience, we can entrust professional institutions to operate technical details, integrate new technologies such as big data, and clarify whether the supervised party bears the cost, and how to open up the cost and foundation.

Regulation is energy-intensive and costly, and requires the involvement of professional technicians and market practitioners. It is hoped that the signals and attitudes of the regulators will be implemented.

Keyword 2:

Continue the main line of strong supervision and risk prevention

Wu Qing: We must put strong supervision in a more prominent position, continuously improve and strengthen supervision on the track of rule of law, and "early identification, early warning, early exposure, and early disposal" of all kinds of risks...... The China Securities Regulatory Commission (CSRC) is working with relevant departments to further build a comprehensive punishment and prevention system, strengthen window time management, encourage "whistleblowers" to report, and consolidate the responsibilities of intermediaries such as investment bank audits.

Dong Yizhi: Measures in the capital market, including protecting investors, regulating financial fraud, and attracting medium- and long-term capital, have actually been mentioned over the years.

But this time, from the perspective of the proposal and the details of the supervision during this period, whether it is from the legislative level, the law enforcement level, or the daily supervision level, we have finally waited for professionals to carry out strong supervision.

In addition, it is also important to note that these regulations are systematic and systematic, which has changed the way of supervision in the past of sports and special events.

As for the whistleblower system, this has always existed, and the New Securities Law has increased the incentives for the whistleblower system, but there are many problems in the details of the operation.

For example, which institution is connected to the whistleblower system? Are there any branches or departments at the SFC level that directly connect with whistleblowers? How to protect the legitimate rights and interests of whistleblowers and give rewards? There have been some lawsuits before, such as some people who believe that they are whistleblowers but have not received the rewards they deserve, can this establish a good mechanism in terms of procedures and implementation details?

Including clarifying which systems can stipulate the identity of whistleblowers, and can get rewards and other details, I hope that the regulator will give a clear attitude, which is conducive to practical operation, and at the same time ensure that the reward mechanism is in place, the current system rewards compared with European and American countries, our rewards may be too low.

To put it simply, if you want everyone to take responsibility, there must be a corresponding incentive mechanism to reduce the pressure of market supervision.

Xu Chaohua: Judging from the opening day of the forum, there is nothing particularly outstanding about the statement on the capital market, which generally belongs to the series of important expositions and institutional arrangements for the development and supervision of the capital market before and after the promulgation of the new "Nine Articles".

However, a benign capital market needs the determination of rules and the fairness of operation, which all depend on the underlying institutional arrangements.

Now the China Securities Regulatory Commission is doing such infrastructure construction work, patching the past and establishing rules for the future. Of course, it is also necessary to understand that it takes a time process to optimize, improve and improve such basic work.

Keyword three:

Regulate quantitative trading and protect retail investors

Wu Qing: In terms of protecting investors, it is necessary to fully consider the largest market situation where small and medium-sized investors account for the vast majority, strengthen the monitoring and supervision of high-frequency quantitative trading, over-the-counter derivatives and other trading tools, and improve the pertinence and adaptability of supervision. We will keep a close eye on all kinds of behaviors that use the advantages of technical information to hold shares and other advantages to disrupt the market and make illegal profits. Actively strengthen cooperation with judicial authorities and other aspects, give better play to the active role of insurance institutions, and promote the implementation of more cases such as securities special representative litigation, advance compensation, and party commitments, so as to provide stronger support for investors to obtain compensation and relief.

Dong Yizhi: I mentioned the regulation of high-frequency quantitative trading and derivatives trading this time, which I think is an important progress.

At the current stage of the development of the mainland capital market, high-frequency quantitative trading has become the norm, but in this field, the regulatory experience of the United States may not be able to learn from it, especially before foreign high-frequency quantitative trading institutions have entered the Chinese market.

Whether it is at the trading level or the securities finance level, I hope that the competent authorities can implement the regulatory measures, slogans and attitudes for high-frequency quantitative trading, and after the mechanism is reasonable, all market participants have responsibilities and can fulfill their responsibilities.

In recent years, there has been some chaos in the capital market, and market fluctuations have also had a great impact on investors, institutions and practitioners, so supervision should stand in a higher dimension, penetrate into the details, and establish a good ecology with the market.

Moreover, supervision is not only at the level of the securities regulatory authority, but also needs to be connected by the financial supervision bureau and the judicial authorities, especially the supervision of the primary and secondary markets.

It is hoped that the regulatory authorities can take these into account, and then remove the undesirable factors of the market, clear the risks, so that the capital market can better serve scientific and technological innovation and industrial upgrading, and attract international long-term capital.

Xu Zhaohua: From the perspective of relevant specific measures, whether it is to encourage reporting, strengthen quantitative management, and highlight the "hard technology" characteristics of the Science and Technology Innovation Board, I think it can be further clarified in the implementation of specific systems, such as how to reward after reporting, whether the guide return can be changed to mandatory return, and the specific implementation rules for promoting compensation.

The author of this article |and Fengyue half丨 Mei Haoyu| Editor-in-charge|Xu Tao

Editor-in-chief | Image source |VCG

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