On May 10, the People's Bank of China (PBOC) released the Report on the Implementation of China's Monetary Policy for the First Quarter of 2024 (hereinafter referred to as the Report). According to the report, since the epidemic, the mainland's financial support for the real economy has strengthened, loans have continued to grow rapidly, and deposits have increased significantly, with the current balance of loans in the mainland reaching nearly 250 trillion yuan and the balance of deposits nearly 300 trillion yuan. In response to the question of "where does the money go, where does the money go", which is of great concern to all sectors of society, the central bank set up a special column in the report entitled "Looking at the Flow of Funds from the Distribution of Deposit and Loan Structure", and answered it through detailed data.
△ Screenshot of the official website of the central bank
The central bank said that there are different levels of statistics on money, and "where the money goes, where the money is" first involves "what is money".
The so-called "money" is actually money. According to the definition of the mainland, the money supply is the money stock of the whole society, and is the sum of the financial instruments that assume the means of circulation and payment at a certain point in time. At present, the currency of the mainland is divided into three levels: M0, M1 and M2. M0, or "cash", is the most active and liquid; M1 is M0 plus a unit demand deposit with slightly weaker liquidity; M2 refers to M1 plus less liquid unit time deposits, resident deposits, etc. Through the deposit statistics on the bank's liabilities, "where is the money"; Since M2 can be derived through channels such as loans, it can also analyze "where the money goes" through the bank's asset side.
From the perspective of "where does the money go", loans are mainly invested in enterprises and the supply side of the real economy.
According to the central bank, to analyze "where the money goes", we must first look at the flow of loans. In terms of sub-sectors, at the end of March, loans to mainland enterprises (institutions) and loans to households reached 163 trillion yuan and 81 trillion yuan respectively, accounting for 66 percent and 33 percent of all loans, respectively, and enterprises are still the majority of loans. In other words, the loan is mainly used to support enterprises to expand investment and production, and residents to purchase houses and consume. In terms of maturity and industry, the proportion of medium and long-term loans in the mainland is more than two-thirds, and asset-heavy industries such as infrastructure, real estate, and manufacturing account for about 50% of all loans, while residents' non-housing consumer loans account for less than 10%. There is relatively more financing in the supply side and investment areas of the real economy, while the demand side, especially consumption, still has great growth potential.
"It is expected that the People's Bank of China will comprehensively use a variety of monetary policy tools, both quantity and price, long and short, activate the stock, make good use of the increment, and improve the ability and efficiency of financial resource allocation." Dong Ximiao, chief researcher of Zhaolian, said that in terms of total liquidity, we should ensure more abundant liquidity, reduce the cost of comprehensive social financing in terms of moderate prices, strengthen "precise drip irrigation" in terms of structure, further stabilize the confidence and expectations of business entities, and guide financial institutions to increase support services for various business entities, especially scientific and technological innovation, green transformation, inclusive small and micro enterprises, and digital economy, and support financial institutions to do a good job in the "five major articles" with greater efforts, so as to create a more suitable monetary and financial environment for macroeconomic recovery and high-quality development.
From the perspective of "where is the money", deposits are mainly in the resident sector.
"In the process of economic circulation, if banks are still expanding assets and loans are still increasing, money will not decrease from the real economy, nor will it disappear, but with the investment and production of enterprises, household consumption, fiscal revenue and expenditure, deposits will be transferred between enterprises, residents, governments and other departments." The central bank said.
According to the report, at the end of March 2024, residents, enterprises, and governments accounted for 49%, 27%, and 14% of the total deposits of about 296 trillion yuan, respectively, an increase of 7.1, a decrease of 4.2, and a decrease of 3.3 percentage points compared with 2019 before the epidemic. Loans are mainly invested in enterprises, and will be reflected in residents' deposits through various expenditures, but due to the need for residents' consumption to recover and the lack of aggregate demand, the deposits are mainly retained in the residential sector, and are not further converted into corporate deposits through the expenditure of the residential sector.
At the same time, the trend of fixed-term deposits of enterprises and residents has intensified, and the proportion of time and demand deposits has risen from "June Fourth" in 2017 to "July Three" at present. In addition, there will be relative changes in the rate of return of various assets such as on-balance sheet deposits and off-balance sheet managed products, which will affect residents' risk appetite and investment behavior, and residents will adjust their asset allocation accordingly, which is also an important factor affecting the proportion of residents' deposits.
"Due to the impact of the epidemic and the decline in risk appetite, enterprises and residents are more inclined to deposits with more stable returns, especially time deposits, at the mercy of assets, resulting in less 'live money' in the economic cycle and poor circulation, which also explains why the people and enterprises are short of money at the micro level, while the total amount of money in the financial system is still increasing." According to industry insiders.
There is already a lot of money stock at the moment.
According to the central bank, for a long time in the past, the mainland's economy has maintained rapid growth, and the continuous increase in economic volume will bring about an increase in the demand for funds. The People's Bank of China (PBoC) has made great efforts to regulate the "general gate of money supply", but it has also had a great impact on the structural problems of deposits and loans such as "where the money goes, where does the money go". The direction of loan investment mainly depends on the demand for bank credit from different types of borrowers, and the flow of deposits between various business entities is more affected by whether the supply and demand of the real economy are balanced and whether the circulation is smooth.
"It should also be noted that the current economic restructuring, transformation and upgrading of the mainland are accelerating, the economy is more lightweight, and the credit structure is also being optimized and upgraded. At the same time, with the recovery of effective demand and the improvement of social expectations, the efficiency of capital turnover has been improved, and the phenomenon of capital precipitation is also alleviating. The growth of the huge monetary aggregate may slow down, which does not mean that the intensity of financial support for the real economy is decreasing, but rather the reflection of the improvement of the quality and efficiency of financial support. The central bank said.
The central bank further said: "It should also be noted that direct financing is accelerating its development, and in the future, with the further expansion of the scale of bonds such as over-the-counter bonds and corporate bonds, these investment and financing activities have not been realized through traditional bank deposit and loan business, and the deposit and loan and money supply will also decline." In fact, the continuous development of this type of direct financing is more conducive to the optimal allocation of resources, the efficiency of capital use is improved, and the role of indirect financing will decline accordingly. Internationally, the more developed economies of direct financing no longer use the money supply as the intermediary target of monetary policy. ”
"Support the joint force of policies, effectively mobilize the use of funds by business entities, and better realize that residents dare to consume, enterprises are willing to invest, and the government can support the bottom line, so as to promote the smooth circulation of the real economy." The central bank said in the report that in the next stage, it will continue to follow the deployment of the CPC Central Committee and the State Council, and the prudent monetary policy will be flexible, moderate, precise and effective, guide the reasonable growth and balanced delivery of credit, revitalize the stock of financial resources, and keep the scale of social financing and money supply in line with the expected targets of economic growth and price levels.
China Business Daily is synthesized from the Central Bank, Shangguan News, and People's Daily Online