Social Finance, New RMB Loans, M1, M2
In April, the scale of new social financing was -198.7 billion yuan, a year-on-year decrease of 1.42 trillion yuan, which was the first time since 2006 that the scale of new social financing recorded a negative value, and the growth rate of social financing fell by 0.4 percentage points to 8.3%. In terms of government bonds, government bonds recorded negative value in April for the first time since 2018, due to the relatively large maturity of government bonds and the slow issuance of local government bonds, and the scale continued to increase slightly year-on-year. In terms of off-balance sheet financing, due to the large scale of bill discounting, the scale of new undiscounted bills in April increased significantly less than the same period last year, which also dragged down the scale of social financing.
In terms of credit, the scale of new credit in April increased slightly year-on-year, of which bill financing increased year-on-year, and there was a phenomenon of bill impulse, and the demand for physical financing was still weak. In April, loans to residents and enterprises of all maturities increased slightly year-on-year. From the perspective of residents' loans, the weak demand for housing is still the main reason for the decline in residents' credit supply. From the perspective of corporate loans, on the one hand, the slowdown in the construction industry has dragged down the financing needs of enterprises. On the other hand, after the cessation of "manual interest payment", the financing of enterprises for arbitrage may also be reduced, which in turn will lead to a further decline in corporate financing needs.
In April, M1 and M2 continued to fall, and M1 turned negative year-on-year. From the perspective of M1, on the one hand, M1 was dragged down by weak new home sales; On the other hand, after the cessation of "manual interest supplementation", some demand corporate deposits were diverted to other financial assets, which further put pressure on M1 growth. From the perspective of M2, under the policy guidance of preventing capital idling and compressing arbitrage channels, the deposit funds precipitated by arbitrage before the arbitrage decreased, and M2 declined. The growth rate of new RMB deposits in all sectors declined from the previous month, among which the year-on-year growth rate of corporate deposits turned negative in April, continuing to hit a new low since 2012. In the next step, the policy authorities may continue to reduce financing costs by strengthening deposit supervision or guiding deposit interest rate reductions, so as to improve the efficiency of capital use and boost financing demand.
Event: In April 2024, new RMB loans were 0.73 trillion yuan, the previous value was 3.09 trillion yuan, and the market expected 0.74 trillion yuan. The scale of new social financing was -0.19 trillion yuan, the previous value was 4.87 trillion yuan, and the market expected 1.01 trillion yuan. M1 was -1.4% year-on-year, and the previous value was 1.1%. M2 was 7.2% year-on-year, the previous value was 8.3%, and the market expected 8.7%. Comments: 1. Government bond financing decreased, and the scale of new social financing turned negative The scale of new social financing in April was -198.7 billion yuan, a year-on-year decrease of 1.42 trillion yuan, which was the first time since 2006 that the new scale recorded a negative value, and the growth rate of social finance fell by 0.4 percentage points to 8.3%. In terms of sub-items, in terms of new RMB loans, the scale of new credit in April increased slightly year-on-year, of which bill financing increased year-on-year, and there was a phenomenon of bill impulse, and the demand for physical financing was still weak. At the same time, in terms of off-balance sheet financing, due to the large scale of bill discounting, the scale of new undiscounted bills recorded -448.6 billion yuan in April, a year-on-year decrease of 314.1 billion yuan, which also dragged down the scale of social financing. In terms of government bonds, government bonds recorded -98.4 billion yuan in April, a year-on-year decrease of 553.2 billion yuan, which was the first negative value of new government bonds since 2018. First, the maturity of treasury bonds in April was relatively large, according to Wind data, the maturity of treasury bonds in April exceeded one trillion, dragging down the net financing scale of treasury bonds; Second, the slow issuance of local government bonds has also affected the scale of government bond financing. According to the information disclosed on the website of the National Development and Reform Commission on April 23, recently, the National Development and Reform Commission and the Ministry of Finance completed the screening of local government special bond projects in 2024, and it is expected that the issuance of local bonds will accelerate in May and June, providing support for the scale of government bond financing. In terms of direct financing, the financing scale of corporate bonds and non-financial enterprises in April recorded 49.3 billion yuan and 18.6 billion yuan respectively, a year-on-year decrease of 244.7 billion yuan and 80.7 billion yuan respectively.
2. Arbitrage channels are compressed, and arbitrage financing decreases In April, financial institutions added 730 billion yuan in RMB loans, an increase of 11.2 billion yuan year-on-year. Among them, loans to residents and enterprises increased by -516.6 billion yuan and 860 billion yuan respectively, with year-on-year changes of -275.5 billion yuan and 176.1 billion yuan respectively. From the perspective of resident loans, new resident loans of all maturities increased slightly year-on-year in April. Specifically, the new short-term, medium- and long-term loans to residents were -351.8 billion yuan and -166.6 billion yuan respectively, a year-on-year decrease of 226.3 billion yuan and 51 billion yuan respectively. Weak demand for housing is still the main reason for the decline in residents' credit supply. According to estimates, the weighted transaction area of second-hand houses in April recorded a year-on-year increase of -27.7%, a decline of 10.7 percentage points compared with March, but the decline was still at a historical high. In addition, according to the "Questionnaire Survey Report on Urban Depositors in the First Quarter of 2024" released by the central bank, the proportion of residents who expect housing prices to "rise" is 11%, down 1.3 percentage points from the level in the fourth quarter of 2023, and the proportion of residents who expect housing prices to "decline" is 22%, up 1.8 percentage points from the level in the fourth quarter of 2023. When residents have strong expectations for the downward trend of housing prices, residents' wait-and-see sentiment is high, which will further drag down the demand for home purchases.
From the perspective of corporate loans, new corporate loans of all maturities in April increased slightly year-on-year. Specifically, the short-term, medium- and long-term new loans of new enterprises in March were -410 billion yuan and 410 billion yuan respectively, a year-on-year decrease of 300.1 billion yuan and 256.9 billion yuan respectively. The PMI of new orders in the construction industry fell by 2.9 percentage points to 45.3% in April, and the slowdown in construction starts dragged down the financing demand of enterprises. In addition, according to the 21st Century Business Herald [1], on April 8, the self-discipline mechanism of market interest rate pricing issued the "Initiative on Prohibiting the Cultivation of Deposits by Manually Raising Deposits with High Interest Rates to Maintain the Order of Competition in the Deposit Market", requiring that from now on, banks shall not promise or pay customers in any form the supplementary interest that exceeds the authorized upper limit of the deposit interest rate. Any interest payment promise made in violation of the previous regulations shall not be paid on the interest payment date. Banks should immediately carry out self-examination and complete rectification by the end of April 2024, and submit the rectification report to the Secretariat of the Self-Regulatory Mechanism for Market Interest Rate Pricing. After the cessation of "manual interest supplement", for the enterprise side, the financing of enterprises for arbitrage may also be reduced, which in turn will lead to a further decline in corporate financing demand.
3. Stop "manual interest supplement", fund transfer dragged down M1 In terms of M1, M1 recorded -1.4% year-on-year in April, down 2.5 percentage points from the previous month. On the one hand, the transaction area of commercial housing in 30 large and medium-sized cities recorded a year-on-year increase of -38.9% in April, and M1 was dragged down by weak new home sales. On the other hand, after the cessation of "manual interest supplementation", some demand corporate deposits were diverted to other financial assets, which further put pressure on M1 growth. In terms of M2, M2 recorded a year-on-year increase of 7.2% in April, down 1.1 percentage points from the previous month. Under the policy guidance of preventing capital idling and compressing arbitrage channels, the deposit funds precipitated by arbitrage before the arbitrage decreased, and M2 declined. Among the new RMB deposits, the growth rate of residents, enterprises and non-bank deposits all declined from the previous month. Among them, the year-on-year growth rate of corporate deposits turned negative in April, recording -0.8%, continuing to hit a new low since 2012. In the next step, the policy authorities may continue to reduce financing costs by strengthening deposit supervision or guiding deposit interest rate reductions, so as to improve the efficiency of capital use and boost financing demand.
Annotation:
[1] Source: 21st Century Business Herald, "This behavior of banks will be deducted points until one vote is vetoed!" 》，（2024/4/12），[2024/4/26]，https://baijiahao.baidu.com/s?id=1796069713040521692&wfr=spider&for=pc
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