Financial support for the economy continued to improve

Source: Economic Daily

How to understand that the balance of broad money (M2) exceeded 300 trillion yuan? How to view the scale of social financing, credit data, and the current level of real interest rates in the first quarter? On April 18, the State Council New Office held a press conference to introduce the financial operation and foreign exchange receipts and payments in the first quarter of 2024, and the relevant responsible person of the People's Bank of China responded to these hot issues.

Zhu Hexin, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, said that on the whole, a series of monetary policy measures introduced in the early stage are gradually playing a role, and the national economy has continued to pick up and made a good start. There is still room for monetary policy in the future, and we will closely observe the effect of the policy, the economic recovery, and the realization of the target, and make good use of the reserve tools when the opportunity is taken.

The balance of M2 exceeds 300 trillion yuan

At the end of March, the balance of M2 rose to 304.8 trillion yuan, which attracted more attention from the market. Some people believe that this is the result of "currency over-issuance". What should we think about this?

"The balance of M2 exceeds 300 trillion yuan, which is a reflection of the continuous financial support for the development of the real economy over the past years. Zou Lan, director of the Monetary Policy Department of the People's Bank of China, said that for a long time in the past, the mainland's economy has maintained rapid growth, the economic volume has continued to increase, and the accumulation of corporate capital and residents' assets has accelerated, which will bring about an increase in currency demand. In line with the stage of economic development, the mainland's monetary and credit policies have also maintained a relatively high growth rate of more than double digits for a long time, creating a suitable environment for economic development.

Wen Bin, chief economist of China Minsheng Bank, said that in the process of credit delivery and credit expansion, it will definitely lead to the expansion of the scale of monetary aggregates while supporting the rapid development of the real economy. We have always adhered to a prudent monetary policy, and we have not engaged in flooding, and the overall money supply still matches the economic growth and the demand of the real economy. "There's no need to pay too much attention to that. Dong Ximiao, chief researcher of Zhaolian, said that this is only M2 breaking through a certain integer point on the basis of maintaining a reasonable growth rate, which does not indicate that monetary policy has turned, nor is it too much money supply.

"Overall, the current stock of money is indeed not low. Zou Lan said that this year's "Government Work Report" proposed to "avoid the precipitation of funds idling". At present, the mainland's economic restructuring, transformation and upgrading are accelerating, the relationship between supply and demand in the real estate market has undergone major changes, the prevention and control of local debt risks has been strengthened, the economy has become lighter, the demand for credit has weakened compared with previous years, and the credit structure is also being optimized and upgraded.

Zou Lan said that all parties will have a process of understanding and adapting to changes, and some banks still have scale complexes in terms of business models and internal assessments, which exceed the effective financing needs of the real economy. With the help of their own advantageous position, some enterprises use the money raised from low-cost loans to buy financial management, deposit time, or re-lend to other enterprises, the main business does not make money, but finance has become the main source of profits, which is easy to form idling and capital precipitation, reducing the efficiency of capital use.

Zou Lan said that the relevant departments will strengthen the monitoring of the idling of funds and improve the management assessment mechanism. In the future, with the transformation and upgrading of the economy, the recovery of effective demand, and the improvement of social expectations, the phenomenon of idle capital precipitation will also be alleviated. At present, the growth of the huge monetary aggregate may slow down, and there will be disturbances in the data, so it is not appropriate to simply compare them with the same period. "But this does not mean that the intensity of financial support for the real economy will be reduced, and efficient enterprises that really need funds will receive more financing, which is a reflection of the improvement of the quality and efficiency of financial support. Zou Lan emphasized.

The scale of new social financing is much smaller

According to data released by the People's Bank of China, the growth rate of social financing was 8.7% at the end of March, with 12.9 trillion yuan of new social financing in the first quarter, and the growth rate of RMB loan balance was 9.6%, with an increase of 9.5 trillion yuan in the first quarter. However, judging from the monthly data, the new RMB loans in March were 3.09 trillion yuan, a year-on-year decrease of 800 billion yuan, and the scale of new social financing was 4,872.5 billion yuan, a year-on-year decrease of 514.2 billion yuan. This has caused concern among many analysts.

"The growth of the scale of social financing in the first quarter basically matches the expected target of economic growth and price level this year, especially the growth of 8.7% on the basis of last year's high base, which is actually not low. Zhang Wenhong, head of the Survey and Statistics Department of the People's Bank of China, said.

From the perspective of the scale of social financing, Zhang Wenhong analyzed that the scale of social financing in the first quarter increased by 12.93 trillion yuan, a year-on-year decrease of 1.61 trillion yuan, mainly due to the high base of the previous year. Judging from the same period in history, the increase in the scale of social financing in the first quarter of this year is still at a relatively high level in the same period in history.

In terms of new credit in the scale of social financing, in the first quarter, RMB loans issued by financial institutions to the real economy increased by 9.11 trillion yuan, 1.59 trillion yuan lower than the same period in 2023. However, in the long run, it is 773 billion yuan higher than the same period in 2022. The same is true from the perspective of new RMB loans by financial institutions, which were 1.13 trillion yuan higher than the same period in 2022 in the first quarter of this year.

Zhang Xu, chief fixed income analyst of Everbright Securities, believes that the more credit is not the better, and only a moderate and stable pace of credit growth can create a suitable environment for the economy to achieve effective qualitative improvement and reasonable quantitative growth. In the first quarter of last year, new RMB loans amounted to 10.60 trillion yuan, accounting for 46.6% of the new loans in 2023.

Zhang Xu shows that over the years, loans often increase at the end of the quarter, which is mainly due to the tendency of some financial institutions to impulse at the end of the quarter, which is easy to cause monthly fluctuations in credit data. The volatility of new loans in March this year decreased significantly compared with February, forming the lowest value in the past year, indicating that monthly fluctuations have been effectively curbed and loan allocation is more balanced.

Zhu Hexin emphasized that in the first quarter of 2023, financial institutions will be able to release loans quickly, and since the second half of last year, we have strengthened the guidance of balanced credit delivery to alleviate the phenomenon of financial institutions' "rushing time". In the first quarter of this year, the ratio of loans returned to the historical average, leaving plenty of room for credit growth in the next three quarters.

Zhang Wenhong further said that this year, the People's Bank of China paid more attention to guiding the balanced growth of credit of financial institutions, and although the scale of new social financing in the first quarter fell year-on-year, it was still at a relatively high level in history.

While the total amount of loans is growing steadily and the allocation is balanced, the investment direction and price are more worthy of attention. In terms of prices, the weighted average interest rate of new corporate loans issued in March was 3.75 percent, 1 basis point lower than the previous month and 22 basis points lower than the same period last year, and the interest rate of new personal housing loans was 3.71 percent, 15 basis points lower than the previous month and 46 basis points lower than the same period last year, both at a historical low. From the perspective of investment, the credit structure continued to be optimized. The new loans were mainly invested in key areas such as manufacturing, infrastructure and services, and the growth rate of loans to the real estate industry also picked up. At the end of March, the year-on-year growth rates of financial institutions' loans to high-tech manufacturing, inclusive small and micro loans, agriculture-related loans and private economy loans were 27.3%, 20.3%, 13.5% and 10.7% respectively, all of which were significantly higher than the growth rates of all loans.

The level of real interest rates is not high

Recently, the market has paid more attention to the issue of real interest rates, and there is a view that the current level of real interest rates is relatively high. How should this be understood?

Previously, the market discussed that the real interest rate refers more to the interest rate paid by enterprises and residents, and in addition to the interest rate specified in the loan contract, there are various fees such as guarantee fees and mortgage registration fees. Therefore, in the past, when we talked about real interest rates, we wanted to reduce the comprehensive financing cost and bring the real interest rate down. In the near future, the issue of real interest rates that the market has been concerned about may still be a concept in economic theory.

Zou Lan said that simply put, the real interest rate discussed this time is equal to the nominal interest rate minus the inflation rate, which is not only related to the nominal interest rate, but also affected by the inflation situation. In the past two years, nominal interest rates have continued to fall, which has played a positive role in promoting the overall economic recovery. However, domestic demand is weak and prices are running at a low level at the same time. For example, the year-on-year growth rate of CPI in January this year fell to -0.8%. Zou Lan believes that this is also an important reason for the increase in discussions on real interest rates.

"Considering that the current low prices are mainly structural and phased, more in-depth observation and analysis are needed. Zou Lan said that the People's Bank of China will maintain price stability and promote a moderate recovery in prices as an important consideration for grasping monetary policy, and pay close attention to the characteristics and trends of inflation indicators. From the perspective of the structure of prices, the price indicators such as CPI and PPI, which we often say, including the average interest rate on loans, are all an average concept. However, in the process of economic structural transformation and upgrading, the transformation of old and new kinetic energy, and the solid promotion of high-quality development, the differentiation of economic and financial indicators in different fields will increase significantly.

In addition to looking at the average, we should also look at the structure. Zou Lan believes that there are differences in loan interest rates in different industries and enterprises, and the rise and fall of product prices are different, and the actual interest rates felt are also different. For example, he said that for the service industry such as culture and entertainment and new kinetic energy fields, prices have been rising, financial institutions are highly motivated to provide financing, and the nominal interest rate is relatively low, and the real interest rate will be lower after deducting the price increase from the financing interest rate. In addition, for industries such as ferrous metals with a high degree of correlation with real estate, the price of products has fallen significantly, and financial institutions will be more cautious, with relatively high nominal interest rates and higher real interest rates.

"For some areas that need to be tightly allocated financial resources, the real interest rate is slightly higher, which is also conducive to promoting enterprises to control production capacity and destocking to a certain extent. Zou Lan believes that this is also a reflection of the requirements of the Central Financial Work Conference to "maintain a reasonable and sufficient total amount, and increase and decrease in structure".

"In general, the situation of prices and real interest rates still needs to be comprehensively studied. Zou Lan stressed that a series of measures in the early stage have been effective, and will continue to be closely observed in the future in combination with the economic rebound, inflation trend and the promotion of transformation and upgrading. It is necessary not only to keep the nominal interest rate at a reasonable level according to the changes and trends in prices, consolidate the positive trend of economic recovery, but also fully consider the needs of high-quality development, avoid reducing the momentum of structural adjustment, and prevent interest rates from being too low, intensifying involution competition, or idling of funds, further reducing prices and falling into a negative cycle. (Economic Daily reporter Chen Guojing)