Domestic dollar funds tightened ** High interest rates

At present, the foreign trade situation is better than expected, and the company’s demand for foreign currency funds is also beyond imagination. In September 2010, the total value of China's imports and exports was 273.1 billion U.S. dollars, an increase of 24.7% year-on-year, which set a record of 262.3 million U.S. dollars in July this year and set a record high. From the first three quarters, China’s total imports and exports in the first three quarters of 2010 were US$21,487, an increase of 37.9% over the same period of the previous year. In view of the vigorous development of foreign trade business, the demand for trade financing has risen sharply in the near future, and the domestic dollar financing rate has also risen rapidly. In the past two months, the domestic dollar lending rate has risen sharply. In particular, the three-month and six-month US dollar lending rates have all increased by more than 100%. The current three-month, six-month and one-year domestic dollar lending rates have been They reached the level of 4.35%, 4.93% and 4.95% respectively, which was 400-500 bp higher than the LIBOR of the same period. The domestic dollar funding surface gradually tightened.

The current tightening of the domestic dollar fund surface is not only related to the improvement of the foreign trade situation, but also the increase in demand for trade financing. It is also affected by the superposition of other factors.

First, the continued appreciation of the renminbi is expected to make it more difficult to obtain domestic and foreign currency funds. The expected appreciation of the renminbi will reduce the willingness of companies and residents to hold dollars. Enterprises and residents will quickly settle foreign exchange after receiving the US dollar and convert it into renminbi in order to avoid exchange losses caused by the depreciation of the dollar. However, when foreign exchange payments are required, enterprises and residents are unwilling to use RMB to exchange foreign exchange to make payments. They are more willing to use the RMB pledge to obtain US dollar funds from commercial banks for financing, and collect exchange differences from the appreciation of RMB. Therefore, the current domestic and foreign currency market presents asymmetry in the slowdown in deposit growth and accelerating loan growth. This also led to the coexistence of the contradiction between the tightening of the domestic dollar funds and the rising of the central bank’s foreign exchange reserves. As of the end of September this year, the balance of foreign currency loans from financial institutions was US$422.7 billion, a year-on-year increase of 23.1%; the balance of foreign currency deposits was US$229.8 billion, a year-on-year increase of 13.1%, and the loan-reducing deposit gap continued to rise. The foreign currency loan-to-deposit ratio is as high as 184%, far exceeding the warning line of 75% of the regulatory authorities. Although the regulators are still not clear that foreign currency loan-to-deposit ratio indicators must be reduced to less than 75%, the current method of comprehensive management of foreign currency and RMB loan-to-deposit ratios by regulatory agencies will inevitably affect the ability of banks to provide foreign currency financing to enterprises. Therefore, it is more difficult for enterprises to obtain foreign currency funds.

Second, the access to foreign currency funds from abroad was blocked. The external debt supervision index controlled by the SAFE, especially the short-term foreign debt index, poses a rigid pressure on the acquisition of foreign exchange funds. In the second half of 2010, China's economy continued to develop steadily, the market is expected to improve, and the foreign capital’s flight situation before the change was quietly flowing into China. In particular, the international hot money inflows reached as much as US$100 billion in September this year, the highest in history. Given that the channel for borrowing foreign exchange funds may also become a channel for large-scale inflow of international hot money into the territory, in order to prevent the impact of hot money on the domestic asset markets and the macro economy and prevent further inflow of hot money, the SAFE will reduce the scale of foreign debt indicators, especially strengthening Short-term foreign debt management. Therefore, this has to some extent blocked the supply of foreign currency funds in the interbank market.

Finally, monopoly pushes up interest rates to some extent. The domestic dollar capital market in China is a monopoly market. The Bank of China and Industrial and Commercial Bank of China are the major providers of foreign currency funds. The market lacks competition. The two state-owned banks have greater control over the domestic dollar price. In the period of rapid development of foreign trade, domestic monopoly factors can easily push up the domestic dollar financing rate.

Looking ahead, with the continued appreciation of RMB (expected), domestic companies and residents will decline in their willingness to hold US dollar deposits, and the reduction of domestic foreign currency loans will continue to expand. The foreign exchange administration's tightening of external debt index control and other factors have led to a shortage of short-term U.S. dollar funds and the difficulty in obtaining funds has increased. The author believes that as long as the rapid development of foreign trade, even if the United States does not raise interest rates in the short term, the domestic dollar loan interest rate may also rise, and may even be much higher than the international dollar loan interest rate. It is estimated that the domestic dollar financing interest rate in the next six months will still be 400BP to 500BP in Libor. Run high.