Economic Indicators Showed &Nbsp; Monetary Policy Entered The Observation Period.

Last week, the central bank continued to ease the return of money this week, with a net investment of 145 billion yuan in the open market.

In June 1st, the central bank issued a 15 billion yuan 1 year central bank vote, which was only half of last week's issuance. At the same time, the yield of the central bank increased by more than 8 basis points (BP) to 2.0096% after being 17 times flat.

Economists believe that this high interest rate does not mean that the increase in interest rate expectations, mainly because the previous year's central issue of low yield, limited investment attractiveness and low demand, the increase is mainly to adjust the yield structure and make it more reasonable.

At the same time, taking into account the slowdown in some leading indicators, the European market uncertainty is still large, domestic tightening policy will enter a period of observation.

The price of the central bank is still dropping or dropping this week.

In the macro-economic environment with increasing economic decline and increasing interest rates in the year, the flat situation of 5 months after the end of the rate of interest rate vane has suddenly risen unexpectedly.

However, analysts believe that the higher interest rate does not mean the increase in interest rate expectations. This is mainly due to the low yield of the central issue of the previous year, the limited investment attraction and the low demand. The central bank's increase is aimed at adjusting the yield structure and making it more reasonable.

At the same time, as the interest rate continues to rise in the money market, the central bank may have to maintain a net operation of 2 weeks.

"Policy tightening has entered a period of observation, one to two months later, we can determine policy direction and intensity."

Shi Lei, a researcher at Bank of China, said that due to the extreme strain of money market funds, it is expected that the central bank will continue to maintain net operation this week.

"The central bank must reduce the 7 day repo rate to less than 1.9, otherwise it will also raise the issuance rate of the 1 year central bank.

Although the issuance of 15 billion was half lower than last week, the agency thought it was still a bit high. After all, the interest rate in the money market has gone up a lot. The rate of return of the central bank's 1.93% is not attractive at all.

Shi Lei said.

"It is reported that the regulatory authorities demand that the bank with a deposit and loan ratio exceed 75% of the banks to reach the standard in the short term (the ratio of deposit to loan ratio to below 75%). This may be the main reason for the tight money market funds in the near future.

Zhao Qingming, a senior research fellow at the Construction Bank, said that at present, the judgment of economic fundamentals is more pessimistic than earlier ones.

In the second half of the year, if foreign exchange continues to fall, the central bank will also relax liquidity in the open market.

Some experts believe that the current liquidity tension also has the impact of international capital outflow.

As Europe's sovereign debt risk intensified, risk aversion pushed the US dollar up significantly. Asian currencies generally depreciated against the US dollar. The Hong Kong dollar exchange rate weakened from 7.76 to 7.80. Offshore renminbi appreciation against the dollar was expected to fall from 3% to 1.5% a year. It can be seen that there is a temporary withdrawal from capital in Asia. It can be assumed that the rise of foreign exchange in May will also be significantly lower than that in April.

Economic indicators show signs of fatigue.

In addition to tight market liquidity, the growth rate of some economic indicators has begun to fall, which also makes policy operation more cautious.

"At present, concerns about inflation have become" growth worry ".

The callback of investment growth will be interpreted by the market as an indication of the expected "real estate severe regulation to lower investment and further increase the risk of economic downside".

Coupled with the European sovereign debt crisis that led to the return of commodities, the market continued to see CPI rise in the short term, but the intensity of annual inflation expectations will be significantly weakened, and concerns about future economic slowdown may gradually intensify.

Expert LU political commissar said.

In fact, the profit growth rate of industrial enterprises announced by the Statistics Bureau has slipped down for two consecutive months, and the economic indicators initially showed a weak phase of growth.

In the view of Hu Chi, deputy director of the China Federation of enterprise research, there are two main reasons: first, the cardinal effect last year; on the other hand, as the price of PPI continues to rise, the growth rate is faster than CPI, causing the cost of industrial enterprises to rise and profits decline.

He predicted that the profit growth rate of industrial enterprises will continue to decline in the future.

"I think the profit growth rate of industrial enterprises will gradually decline in the future."

Hu Chi said.

According to his analysis, in the current state of the real estate market tightening policy, energy conservation and other macroeconomic regulation and control policies and the European debt crisis and other factors, domestic and foreign demand in the future steel and building materials and other related industries will be directly or indirectly affected by different degrees, and the pressure on the growth of sales revenue of industrial enterprises will increase.

Moreover, the gap between the producer price of industrial products and the price index of raw materials and power fuels has been negative for 6 consecutive months since December 2009.

From the time difference relationship between the leading indicator PPI-PPIRM and the profit index of industrial enterprises, the profits of industrial enterprises will also gradually fall into a downward channel.

Li Xunlei, chief economist of Guotai Junan, also believes that the profit figures for industrial enterprises above Designated Size released by the Statistics Bureau will continue to decline to the next year.

China's industrial profit growth rate is expected to be 63% in the two quarter, 32% in the three quarter and 3% in the fourth quarter, falling to the lowest point of -5% in the first quarter of 2011, then gradually increasing, and in the three quarter of 2011, the growth rate has been positive, and the fourth quarter of 2011 has reached 30%.

Output and price are two major factors determining the level of profit.

Looking forward to the 2011, the drop in the growth rate of exports and real estate investment means the decline in the growth rate of industrial added value, that is, the decline in the growth rate of income. The decline of PPI means a decline in the level of profit margins, so the growth rate of industrial profits will be significantly lower than that in 2010.

He said.

Societe Generale Bank predicts that in May, China's fixed asset investment will continue to decline on the basis of last month's fall, and it will decline for the eighth consecutive month since September last year.

Economic growth or a slight slowdown

Economists believe that the international debt crisis in Europe is becoming more and more intense, and domestic policy regulation and control is increasing. Our economy wants to maintain the momentum of rapid growth in the first quarter, and the difficulty is increasing.

"We expect that the recent developments in Europe will further reduce China's trade surplus in 2010 (to about $100 billion).

Even if the volume of exports does not change much, the export volume in US dollars (and by Renminbi) will have an impact.

European customers have asked exporters to cut prices due to the devaluation of the euro.

Wang Tao, chief economist at UBS Securities, said, "by the end of 2010 and 2011, there will be a more pronounced slowdown in China's exports."

Wang Tao even believes that the European debt crisis may affect the growth rate of China's economy.

He said: "we maintain the current forecast for China's GDP growth of 10% in 2010 and 8.7% in 2011, but there are still more downside risks in our forecast, especially for 2011."

The increase of domestic macroeconomic regulation and control may also have an impact on the speed of economic growth.

Since the financial crisis, China's economic efficiency has bottomed up. The biggest contributor is fixed asset investment, of which real estate investment accounts for a large proportion.

It is undeniable that the regulation and control of the real estate industry is an important means to maintain the sound development of the industry, but at least in the short term, regulation will inevitably inhibit the growth rate of investment.

Another regulatory policy, which has long-term gains but may impact economic growth in the short term, is to eliminate backward production capacity.

"We believe that the backward production capacity of the target tasks eliminated before the three quarter will have a certain impact on the industrial added value, especially the output of non-ferrous metal products will drop more. At the same time, restrictions on the production capacity of smelting resources such as coke and pig iron will have a certain impact on Shanxi and other provinces that rely on smelting and resources.

The implementation of this policy reflects the government's determination to readjust its economic structure, especially backward production capacity, and we will reduce the GDP growth rate in the three quarter. "

Zhai Taihuang, head of Shanxi securities macro strategy group, said.

For the future policy direction, Shi Lei believes that after this period of wait and see, monetary policy may be tight and loose.

At present, the tightening of monetary policy is relatively small, mainly due to the increasing concerns about the steady growth of external demand in the future. It is expected that monetary policy will tighten further as the inflation pressure exceeds expectations in the three quarter.

But at the end of the season, the central bank will relax its policy.