Core Viewpoint - The 20th Central Committee's Fourth Plenary Session approved the "Suggestions on Formulating the 15th Five-Year Plan for National Economic and Social Development," emphasizing a stable and continuous monetary policy framework that will guide financial market operations during the 15th Five-Year Plan period [1] Monetary Policy Framework - The "scientific and stable" monetary policy aims to balance short-term and long-term goals, economic growth and risk prevention, as well as internal and external factors [1] - The central bank's liquidity toolbox is well-stocked, with a reasonable distribution of terms, allowing for both short-term and long-term liquidity adjustments [2] Liquidity Tools and Mechanisms - The central bank has shifted its focus from quantity targets to interest rate levels, indicating a reduced emphasis on the monetary supply's direct control [2] - Different liquidity tools serve distinct purposes, with reserve requirement ratio (RRR) adjustments being used more cautiously compared to other tools [3] Interest Rate Mechanism - The central bank will adjust the timing of MLF operations to follow LPR announcements, reinforcing the significance of the 7-day reverse repurchase rate as a policy interest rate [3] - The transmission mechanism of monetary policy is structured as "economic growth - policy interest rate - market interest rate," with the 7-day reverse repurchase rate becoming a key determinant for 10-year government bond yields [5] Economic Indicators and Policy Signals - Historical data shows that each round of RRR cuts corresponds with a decline in government bond yields, indicating that RRR adjustments signal policy easing [4] - The frequency of interest rate cuts is lower than that of RRR cuts, suggesting a more cautious approach by the central bank regarding interest rate adjustments [6]

Core Viewpoint - The recent adjustments in the Loan Prime Rate (LPR) and deposit rates by major banks are aimed at stimulating the real economy and enhancing the quality of development in the banking sector [1][2][4]. LPR Adjustment - The LPR has been lowered for the first time this year, with the one-year rate decreasing by 10 basis points to 3% and the five-year rate also dropping by 10 basis points to 3.5% [1][3]. - This adjustment follows a previous reduction in the policy interest rate by the People's Bank of China (PBOC) on May 7, which was expected to influence the LPR downwards [3][4]. - The PBOC has established the 7-day reverse repurchase rate as a new pricing anchor for the LPR, indicating a shift in monetary policy tools [3][4]. Deposit Rate Adjustment - Major banks, including six state-owned commercial banks, have adjusted their RMB deposit rates, with changes ranging from 5 to 25 basis points [5][6]. - The adjustments include a 5 basis point decrease in the demand deposit rate and a 15 basis point decrease for various fixed-term deposits [5][6]. - This move is seen as a necessary step for banks to lower funding costs and stabilize net interest margins following the LPR decline [7]. Impact on the Real Economy - The dual reduction in lending and deposit rates is expected to lower the overall financing costs for the economy, thereby stimulating investment and production [8]. - The coordinated macroeconomic policies have enhanced market confidence, directing more funds towards capital markets and real enterprises [8]. - The banking sector is encouraged to utilize various structural monetary policy tools to support key areas such as technological innovation, consumption, and small and micro enterprises [8].