The "moving" of deposits affected the decline of M2 and M1, and the strength of financial support entities remained solid

In recent months, the market has paid a lot of attention to the changes in M1 and M2.

On May 11, the latest data released by the central bank showed that at the end of April, the balance of broad money (M2) was 301.19 trillion yuan, up 7.2% year-on-year (up 8.3% year-on-year in March). The balance of narrow money (M1) was 66.01 trillion yuan, down 1.4% year-on-year (up 1.1% year-on-year in March).

An authoritative expert told Yicai that since 2023 is the first year of a stable transition of the epidemic, the growth rate of M2 has rebounded significantly, resulting in a high base. From the perspective of the two-year average growth rate excluding the impact of the base, at the end of April 2023 and 2024, M2 grew by an average of 9.8%, which was higher than the average growth rate of the same period from 2018 to 2022, maintaining reasonable and abundant liquidity. The growth rate of asset management products rebounded rapidly, with a year-on-year increase of 11.3% at the end of April, which diverted on-balance sheet deposits to a large extent. Money supply growth is expected to stabilize in the coming months.

The "move" of deposits caused M2 to fall

At the end of April, the balance of M2 increased by 7.2% year-on-year, down 1.1 percentage points from March. From the perspective of comprehensive market analysis, this is mainly related to three factors.

The bond market is one of the influencing factors. Zhang Yu, chief macro analyst of Huachuang Securities, said that residents' enthusiasm for buying wealth management has increased, bank deposits have been diverted and transformed into non-bank products such as wealth management, and non-bank institutions have abundant funds, and the demand for borrowing money from banks to purchase bonds has decreased. In April, the amount of funds lent by banks to non-bank institutions dropped significantly, and it is roughly estimated that the volume of the reduction may be around 3 trillion yuan, which is similar to the reverse process of the bond market adjustment at the end of 2022. At that time, deposits were "flowing back" to banks, and the growth rate of M2 in November 2022 was 0.6 percentage points higher than that in October. Recently, deposits have been "diverted" to the financial market, causing the growth rate of M2 to decline.

The growth rate of M1 has also fallen due to this, as bond prices have risen, the yield of related wealth management product investment has risen, and the situation of corporate demand deposits "moving" to wealth management is also more obvious.

"Recently, the interest rate of the bond market has fallen rapidly, and the yield of wealth management and funds is considerable, and the deposits of many enterprises and residents have been diverted to wealth management. In April, wealth management increased by more than 2 trillion yuan month-on-month, which was diverted from deposits. At the same time, the demand deposits of enterprises are the focus of the standardized governance of manual interest supplements, and these deposits flow to the wealth management and bond markets. Said the above-mentioned authoritative expert.

Standardized governance such as capital idling and manual interest compensation is the second influencing factor. Zhang Yu said that recently, many departments have increased the standardization of the phenomenon of "low loan and high deposit" idling arbitrage of funds, and manual interest payment by banks, and a considerable part of the inflated and non-standard deposits and loans in the past have decreased, and there is a "squeeze" effect in the short term.

In addition, the optimization and adjustment of value-added accounting in the financial industry also has an impact. In the past, the quarterly accounting method of added value of the financial industry referred to the growth rate of deposits and loans, but since the first quarter of this year, the National Bureau of Statistics has revised it to refer to the indicators of net interest income, net fee and commission income.

Market analysis believes that this can more objectively reflect the contribution of the financial industry to the real economy, and it is more connected with the annual accounting data.

Zhang Yu said that since April, the local government's momentum to increase the added value of the financial industry by supervising deposits and loans has weakened significantly, which is also related to the decline in the growth rate of financial aggregates in April, and the related impact may continue to appear during the year. However, efficient enterprises that really need capital will receive more financing, and financial support for the real economy has not weakened.

At present, the currency of the mainland is divided into three levels: M0, M1 and M2. M0, or what we often call "cash", is the most active and the most 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.

In this regard, the above-mentioned authoritative source stressed that in the composition of M1, the majority of corporate demand deposits in the past were mainly the pre-sale funds of residents to buy new houses in real estate enterprises, and the sales of new houses of real estate enterprises have declined in the past two years, which also affects the decline of demand deposits of real estate enterprises. "In addition, the convenience of corporate payment has improved a lot, and enterprises can put money in financial products when they operate, and do not need to put money on demand deposits, and the demand for demand deposits by enterprises has declined."

Under the influence of multiple factors, the data of M2 and M1 have fallen. Market analysts believe that it is not appropriate to make a direct comparison with the same period in history.

The scale of social financing is more appropriate to reflect the total amount of financial support

At present, the scale of social financing is more suitable to reflect the total amount of financial support. Zhang Yu said that it should be noted that the total scale of M2 and asset management products is relatively stable. Whether it is provided in the form of banks or asset management products, although the channels have changed, the financing support received by the real economy has not changed, the financial support for the real economy is stable, and the quality and efficiency of support have gradually improved in the context of preventing capital precipitation and idling.

M2 has some limitations as an indicator of financial aggregates. In Zhang Yu's view, some funds are no longer included in the M2 statistics after being diverted from deposits to wealth management, but the supply of funds in the real economy has not changed fundamentally, and it is not comprehensive to examine the total amount of financing from the perspective of M2. Internationally, the central banks of the United States, Europe and Japan have all faced the acceleration of financial disintermediation and the inconsistency between M2 and the real economy in the 80s and 90s of the last century.

In the United States, for example, there has been a sharp decline in M2 growth and faster growth in the nominal economy and credit. In 1994, M2 growth in the United States fell from 1.6% to 0.4%, but nominal GDP growth increased from 5.2% to 6.3% and credit growth increased from 4.1% to 9.3% that year.

Looking ahead, there are still some positive factors for M1 and M2 to stabilize and rebound. The above-mentioned authoritative experts told Yicai that first of all, the economy as a whole is good. The confidence of small and medium-sized enterprises has rebounded steadily, and production investment has become more dynamic.

At present, the growth rate of green loans and medium and long-term loans to the manufacturing industry has remained at a high level of about 30%, and the growth rate of loans to "specialized, special and new" enterprises has reached nearly 20%, injecting new momentum into the economy.

In addition, the effect of macroeconomic policies will also appear, and the economic recovery is expected to continue. This year, the Ministry of Finance will also issue 1 trillion yuan of ultra-long-term special treasury bonds, which will help continue to strengthen and consolidate the positive trend of economic recovery.

Zhang Yu also expects the growth rate of the money supply to stabilize in the coming months. First, the financing demand of the real economy is gradually improving. In the economic operation, the positive factors have increased, the momentum has continued to increase, the economic recovery trend is obvious, and the financing needs in the fields of scientific and technological innovation, green development, and inclusive small and micro enterprises will also be more visible. Second, government financing is expected to accelerate. The gradual accumulation of counter-cyclical adjustment of fiscal policy, the early issuance and use of ultra-long-term special treasury bonds, and the acceleration of the issuance and use of special bonds will also support the growth of monetary aggregates. Third, the bond market has gradually returned to the logic of fundamentals. Since late April, the yield of 10-year treasury bonds has risen, resulting in fluctuations in wealth management yields and a decline in attractiveness.

Zhang Yu emphasized that the scale of social financing can better reflect the strength of financial support for the real economy. With the acceleration of direct financing and the deepening of finance, the indicators to measure financial support for the real economy also need to be adjusted and optimized accordingly according to changes in the situation. After the transfer of deposits to wealth management, the invested assets will still be reflected in the statistics of the scale of social financing in the mainland. In addition, the mainland's financial market has been deepening, the bond and credit markets have developed more balanced, and the growth rate of direct financing has accelerated. In the future, the relative reference value of the scale of social financing as a measure of total volume will continue to be reflected.

According to central bank data, at the end of April, the stock of social financing was 389.93 trillion yuan, a year-on-year increase of 8.3%, which basically matched the expected targets of economic growth and price levels. From January to April, the cumulative increase in the scale of social financing was 12.73 trillion yuan, which was at a high level in the same period in history.

(This article is from Yicai)