"Financial and economic data are on the same page?" The first-quarter monetary policy report responded to the blockbuster

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"), which explained the policy orientation and focus for the next stage and released positive signals on the basis of reviewing the policy effectiveness since the beginning of this year and comprehensively analyzing the current economic and financial situation.

The report said that in the future, as the policy effect appears, the momentum of economic recovery will continue to consolidate and strengthen, and the central bank will grasp the policy strength and rhythm according to the changes in the situation.

The effect of monetary policy continues to be demonstrated

The report reviewed the macroeconomic situation since the beginning of the year and pointed out that "the prudent monetary policy is flexible, moderate, precise and effective, which has created a good monetary and financial environment for the economic rebound".

"Since the beginning of the year, monetary policy regulation and control have been intensified to support the economic recovery." Dong Ximiao, chief researcher of Zhaolian, told the Financial Times reporter.

The RRR was cut by 0.5 percentage points to release more than 1 trillion yuan of medium and long-term liquidity, the re-lending and rediscount rates for rural support and small enterprises were lowered by 0.25 percentage points, and the LPR with a maturity of more than 5 years was reduced by 0.25 percentage points, which exceeded market expectations, and the 500 billion yuan of collateral supplementary loan (PSL) quota was issued to support the construction of the "three major projects". Set up a 500 billion yuan re-lending ...... for scientific and technological innovation and technological transformation A series of policies have achieved remarkable results, effectively supporting the development of the real economy and promoting a virtuous cycle of economy and finance.

According to the data, the growth rate of social financing scale and M2 at the end of March was 8.7% and 8.3% respectively, higher than the economic growth rate of 5.3% in the first quarter.

"In the future, the effect of policy combination is expected to continue to appear, consolidating the momentum of economic price recovery." Dong Ximiao said that last year's 1 trillion yuan of additional treasury bonds have been issued, the start of major projects in various places has accelerated, this year will issue 1 trillion yuan of ultra-long-term special treasury bonds, 500 billion yuan of scientific and technological innovation and technological transformation re-lending gradually landed, coupled with the early stage of the RRR cut, reduce LPR and other policy effects are still emerging, is conducive to further consolidating the economic recovery trend. Since April, enterprises are expected to accelerate the improvement, residents' holiday consumption has continued to recover, export growth has accelerated, and import volume and price have risen.

For the next step of the policy, the report mentioned that the central bank will maintain price stability and promote a moderate recovery in prices as an important consideration in grasping monetary policy, and with the improvement of domestic demand, the price level will show a moderate upward trend. The consensus expectation is that the April CPI is expected to rebound from its lows. Market experts said that judging from the current situation, the economic growth rate in the second quarter may still remain at a relatively high level of about 5.5%, and the sustained economic improvement is expected to continue, and it is not difficult to complete the annual growth target; In the next stage, the central bank will observe more of the policy effect and economic recovery in the previous stage, strengthen policy coordination, and grasp the intensity and rhythm of regulation and control according to changes in the situation, so as to promote the continuous recovery of the economy.

Financial support further adapts to the needs of high-quality development

It is worth noting that the report also focuses on the analysis of the credit situation.

Among them, focusing on the relationship between credit growth and high-quality development, the report emphasizes that "the total amount of credit in the mainland has slowed down from a high growth rate of more than double digits in the past to single digits, but this does not mean that financial support for the real economy has weakened".

"At present, the scale of the mainland's credit stock is already relatively high, and with the acceleration of economic restructuring and transformation and upgrading, the quality and efficiency of financial support for the real economy also need to be further improved." Industry experts told the Financial Times that at this stage, the central bank pays more attention to guiding the balanced delivery of credit.

Previously, at the press conference of the State Council Information Office held on January 24, Pan Gongsheng, governor of the People's Bank of China, specifically pointed out that "stable and continuous credit support is needed for the economic rebound", and said that "the central bank will guide financial institutions to grasp the rhythm and steadily support the real economy, and it is expected that the rhythm of credit delivery will be more balanced throughout the year."

Judging from the financial data in the first quarter, the total financial volume grew steadily, and the pace of credit became more stable. The Financial Times reporter learned that according to the historical law, April, July and October are usually small months for loans, but according to the information learned by the Financial Times reporter from the bank, the central bank has guided the balanced delivery of credit in the early stage, and the loan growth rate in April is relatively stable.

Compared with scale, the quality and efficiency of financial support for the real economy are more important. Previously, a number of industry experts have said that observing financial indicators in the process of high-quality economic transformation should not only look at the quantity, but more importantly, the quality. Since the beginning of this year, the relevant responsible person of the central bank has repeatedly stressed the need to revitalize the stock of financial resources, optimize the credit structure, and improve the efficiency of the use of funds. The first-quarter report clearly pointed out that with the transformation and upgrading of the mainland's economic structure, the demand for credit will "shift" compared with previous years, and the credit structure is also being optimized and upgraded.

"Where the money goes, where the money is"

In fact, the central bank publishes financial data every month. At present, the balance of broad money M2 in the mainland has exceeded 300 trillion yuan, and the scale of deposits and loans is also very large, and it is still growing rapidly. But at the same time, the domestic demand of the mainland economy is insufficient, and the inflation level remains low, where does the money go, does it effectively support the real economy, and is there any idling?

In this regard, the report explains what money is in layman's terms, and through the analysis of the flow of bank deposits and loans, it answers the question of "where does the money go, where is the money" and the market's question of "why the trend of financial and economic data is inconsistent" by analyzing the flow of bank deposits and loans.

In fact, the central bank can appropriately guide "where the money goes", but it mainly depends on the needs of economic entities themselves. According to the analysis of the report, in the past, mainland loans were mainly invested in enterprises, and in terms of industry and term structure, they were mainly in heavy asset areas such as infrastructure, real estate, and manufacturing, and most of them were medium and long-term loans.

"In recent years, the central bank has been actively guiding capital investment, and with the acceleration of economic transformation and upgrading, the credit structure is also being optimized. However, on the whole, due to the lack of effective consumer demand, the supply side of the real economy and the investment sector have received more financing, which also explains to a certain extent why inflation in the mainland remains low in the context of high global inflation. Industry experts said.

At present, it takes time for the economic cycle to recover, and part of the money is deposited in the residential sector. The report said that 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. Due to the fact that household consumption has yet to be recovered and aggregate demand is insufficient, deposits are mainly retained in the residential sector, and are not further converted into corporate deposits through household sector expenditure.

In addition, industry experts explained that due to the impact of the epidemic and the decline in risk appetite, enterprises and residents are also more inclined to deposits with more stable returns, especially time deposits, 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.

There is already a lot of money stock, and the key is to revitalize the stock and smooth the circulation. Experts said that the focus of macroeconomic policy in the future should shift from increasing supply in the past to improving consumer demand and promoting the balance between supply and demand. The mainland's direct financing and bond markets are developing rapidly, and these investment and financing activities are not realized through traditional bank deposits and loans. It will be more convenient for residents to buy over-the-counter bonds, and the demand for deposits, loans, and money will also decline.

Industry insiders also mentioned that with the development of direct financing, the growth rate of M2 will slow down in the future, but this is not a weakening of financial support, but a reflection of the optimization of financing structure and the improvement of financial quality and efficiency, and it is also a good thing to meet the financing needs of the real economy.

Source: Financial Times client

Reporter: Ma Meiruo

Editor: Yang Jingyi

Email: [email protected]