Data released by the National Interbank Funding Center on the 20th showed that the 1-year LPR was 3.85%, a decrease of 20 basis points from the previous month; the 5-year and above LPR was 4.65%, a decrease of 10 basis points from the previous month. This is the most powerful interest rate cut by the central bank in 2020, and it is also the “single interest rate cut with the longest span” in Chinese history.
The recently held meeting of the Political Bureau of the Central Committee of the Communist Party of China pointed out that prudent monetary policy must be more flexible and appropriate, using measures such as RRR cuts, interest rate cuts, and re-lending to maintain reasonable and sufficient liquidity, guide loan market interest rates downward, and reduce The funds will be used to support the real economy, especially small, medium and micro enterprises. Some cotton textile companies, cotton traders and investors believe that the benefits of interest rate cuts are reflected in the following aspects:
First, as the policy is implemented, it will effectively alleviate the financial pressure and pressure on some cotton-related companies. Financing costs play a key role in stabilizing and even rebounding the entire industry. Affected by the COVID-19 epidemic, my country’s cotton spinning industry is facing a series of difficulties such as semi-stagnant production and sales and tight cash flow. It needs the government to continue to provide support in all aspects such as policy, taxation, and funding. The interest rate cut is a timely help for textile and garment enterprises and foreign trade companies. Some cotton companies in Xinjiang faced pressure to repay loans and financing at the end of May. The interest rate cut gave them the courage and confidence to tide over the difficulties.
Second, the central bank has significantly increased its interest rate cuts, and cotton-related companies and investors are full of expectations for more active and effective fiscal policies in the future. The Politburo meeting held on April 17 proposed that we should continue to “use measures such as RRR cuts, interest rate cuts, and re-lending to ensure reasonable and sufficient liquidity and guide the loan market interest rates downward.” According to industry analysts, after today’s sharp LPR interest rate cut, it is estimated that there will be room for about 30 points of interest rate cuts this year.
Third, the interest rate cut will effectively stimulate the domestic demand market and weaken the impact of the sharp decline in foreign trade export orders on the entire textile and clothing industry. As the COVID-19 epidemic broke out in Japan, South Korea, Europe and the United States, orders from Chinese companies were canceled or postponed on a large scale. Pressure was exerted from terminal foreign trade companies and clothing companies to weaving, cotton spinning mills, and cotton companies. At present, textile and garment enterprises in Guangdong, Jiangsu, Zhejiang, Shandong and other places have shifted their sales focus to the fiercely competitive domestic market.
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