Since this year, the growth rate of M2, M1 and other monetary supply indicators have slowed down. In the short term, the squeezing effect of financial data on the total volume indicators is still there. Asset management product fundraising is growing fast, up 10.3% year-on-year at the end of July, which has diverted a large proportion of bank deposits. At present, financial data has basically stabilized and maintained reasonable growth.
On August 13th, Cailian Press (Reporter Wang Hong) reported that the central bank released financial data for July. The data showed that at the end of July 2024, the balance of broad money (M2) was 303.31 trillion yuan, a year-on-year increase of 6.3%, which was 0.1 percentage point higher than the end of the previous month. The balance of narrow money (M1) was 63.23 trillion yuan, a year-on-year decrease of 6.6%. The amount of currency in circulation (M0) was 11.88 trillion yuan, up 12% year on year. Net cash was injected by 539.6 billion yuan in the first seven months.
At the end of July, the scale of social financing was 395.72 trillion yuan, up 8.2% year on year, which was 0.1 percentage point higher than the previous month. The growth rate basically matched the expectation of economic growth and price level. The balance of RMB loans issued to the real economy was 247.85 trillion yuan, up 8.3% year on year.
In addition, the data showed that the fundraising growth of asset management products was relatively fast, up 10.3% year on year at the end of July, which diverted a large proportion of bank deposits.
Overall, since this year, the growth rate of monetary supply indicators such as M2 and M1 has slowed down. Experts today said that in the short term, the squeezing effect of financial data may still affect the total volume indicators. However, the squeezing effect will promote more accurate and reliable financial data, and it will be conducive to the benign interaction between finance and the economy. They emphasized that at present, financial data has basically stabilized and maintained reasonable growth.
Is financial data still being squeezed?
Recently, the growth rate of M1 has continued to decline. Experts admitted that in the short term, the squeezing effect of financial data may still affect the total volume indicators. After some virtual deposits and loans are squeezed out, financial data will experience a certain degree of decline. Particularly, considering that some of the current account deposits of enterprises have received relatively high interest rates through manual interest supplement in the past, these behaviors will continue to show as the deposits are gradually transferred to wealth management. This will cause M1 to continue to decline in the coming months.
But the expert emphasized that the squeezing effect of financial data promotes more accurate and reliable financial data. In the past, some of the growth of corporate debt existed in idling funds. After financial regulatory authorities regulate these behaviors, the ratio between deposit income and expected investment return changes. The arbitrage space disappears and some corporate funds are freed up to expand investment and increase research and development input, which is more conducive to the high-quality development of the real economy. A pharmaceutical company reflected that after the manual interest supplement was regulated, the company withdrew 0.2 billion yuan of deposits from one of the major banks and used it to build a new production workshop, purchase related equipment to expand reproduction.
Meanwhile, the squeezing effect of financial data is conducive to the benign interaction between finance and the economy. Industry experts believe that the squeezing effect of financial data also helps to unravel the 'chain of accounts receivable' of corporate debts, improve the efficiency of corporate fund turnover, better meet the effective financing needs of operating entities and enhance the quality and level of financial services. A paper products manufacturer transferred 4 million yuan from its account-opening bank after failing to obtain high-interest subsidies for corporate deposits, and used the funds to pay off upstream enterprise debts.
How should the increasing number of bills financing be viewed?
Regarding loans, at the end of July, the balance of various loans denominated in RMB was 251.11 trillion yuan, up 8.7% year on year. From January to July, various loans increased by 13.53 trillion yuan. Looking at different sectors, household loans increased by 1.25 trillion yuan, of which short-term loans increased by 60.8 billion yuan and medium- and long-term loans increased by 1.19 trillion yuan. Corporate loans increased by 11.13 trillion yuan, of which short-term loans increased by 2.56 trillion yuan and medium- and long-term loans increased by 8.21 trillion yuan. Bills financing increased by 214.6 billion yuan, and loans from non-bank financial institutions increased by 594.6 billion yuan.
The market is concerned about the relatively high growth of bills financing in the newly added loans in July. Regarding this issue, experts stated that the on-balance-sheet bills are part of loans and they are an important financing channel for the real economy, especially for small and medium-sized enterprises. Under the premise of meeting the requirements of real transaction relationships and creditor-debtor relationships, bills have short deadlines, high convenience and liquidity, and the cost of small and medium-sized enterprises using bills to discount with banks for funds is the same as borrowing directly from banks.
"Especially when the effective financing demand is insufficient, banks have to increase their support for the real economy in the short term, while the project reserve is insufficient. Banks will increase the amount of on-balance-sheet bills financing by big companies to small and medium-sized enterprises. This will transform the off-balance-sheet bills representative of corporate credit into on-balance-sheet bills representative of bank credit that provides real financial support to the enterprise." The above expert also mentioned that with the downward trend of bill interest rates, the cost of small and medium-sized enterprises using bills financing will also decrease, which can stimulate financing demand.
Is the effective financing demand still insufficient?
From the perspective of credit flow, the central bank data shows that more credit resources flow to key areas and weak links in the national economy. At the end of July, the balance of medium- and long-term loans for the manufacturing industry was 13.63 trillion yuan, up 16.9% year on year. Among them, the balance of medium- and long-term loans for high-tech manufacturing increased by 15.5%. The balance of loans for specialized, special, and new enterprises was 4.17 trillion yuan, up 15.0% year on year. The balance of inclusive small and micro loans was 32.1 trillion yuan, up 17% year on year. The growth rate of these loans is higher than that of various loans in the same period.
In the view of experts, financial data presents new characteristics and largely reflects the pains of old and new kinetic energy transformation. As China's economic structure transformation and upgrading accelerates, traditional loans that are highly dependent on credit funds, such as real estate and local financing platforms, are gradually adjusting, which is reflected in credit data as no growth or even contraction. Short-term loan demand in new energy fields such as technological innovation, advanced manufacturing, and green development is difficult to fully replace, resulting in fluctuations in credit growth due to the inability to make up for the decline in traditional loan areas.
As the economy gradually enters a benign cycle, the demand for effective financing will also rebound. Industry experts believe that the effects of previous policies are gradually emerging, which will drive the recovery of effective demand. In the future, the focus of economic policies will shift more towards benefiting the people's livelihood and promoting consumption, focusing on stimulating domestic demand, and as consumption recovers, the economic cycle will become smoother, and new effective financing needs will be created.