Text/Song Xuetao, head of the macro team of Tianfeng Securities
Data released by the People's Bank of China on May 11 showed that new social financing decreased by 198.7 billion yuan in April, a record low in the year-on-year growth rate and new additions in the month. M1 related to the degree of capital activity increased by -1.4% year-on-year, in the non-Spring Festival months (January to February), the year-on-year growth rate of M1 turned negative for the first time, and the trend of financial data in April and economic data (PMI, GDP) have a significant divergence, which is a process of "squeezing water" and "de-financialization" of the economy by financial data.
In April, the new social financing decreased by 198.7 billion yuan, and the year-on-year growth rate and the new increase in the month hit a record low. M1, which is related to the degree of capital activity, increased by -1.4% year-on-year, and the year-on-year growth rate of M1 turned negative for the first time in the non-Spring Festival months (January-February).
There was a marked divergence between the trend of financial data and economic data (PMI, GDP) in April.
Financial data "squeezing the water"
In April, the statistical caliber was adjusted and the supervision became stricter. In the first quarter of this year, the National Bureau of Statistics optimized the quarterly accounting method for the added value of the financial industry. The value-added accounting of the financial industry has changed from the year-on-year growth rate of the balance of deposits and loans as the main reference to the relevant indicators of the bank's income statement, such as the growth rate of net interest income.
Under the previous accounting model, in order to push up the GDP of the financial industry, some local governments may strengthen the guidance and assessment of the growth rate of deposits and loans of financial institutions at the end of the month, resulting in a month-end surge in the total amount of money and credit, and credit may be inflated.
Compared with the old method, the new method mainly refers to the net interest income of financial institutions, and the requirements for credit growth are significantly weakened, and the demand for institutions to push up credit growth is reduced. The "squeeze of water" in financial data will have an impact on the growth rate of total credit in the short term.
At the same time, the policy has strengthened the supervision of the idling of funds. The first-quarter monetary policy implementation report reminded that "it is necessary to pay close attention to the situation of capital precipitation and idling, and promote the improvement of the efficiency of capital use". In April, the regulator strengthened the governance of "manual interest supplementation".
The supervision of manual interest replenishment and the idling arbitrage behavior of enterprises with "low loans and high deposits" will also curb the idling of corporate deposits, with deposits of non-financial enterprises falling by 1.87 trillion yuan in April, and will also reduce the demand for loans originally for the transfer of deposits, and the previous high-interest deposits may also be used by enterprises to repay existing loans, resulting in a decline in new loans.
"Definancialization" of the economy
Since the beginning of the year, the performance of credit and social finance data has continued to be weak against the background of weak residents' willingness to buy houses, low corporate financing demand, and significantly slow progress in the issuance of government bonds this year. From January to April, the new social finance was 12.7 trillion yuan, a year-on-year decrease of 3.04 trillion yuan, the new physical loans were 9.4 trillion yuan, a year-on-year decrease of 1.7 trillion yuan, and the net financing of government bonds was 1.26 trillion yuan, a year-on-year decrease of 1.02 trillion yuan. The growth rate of social finance fell from 9.5% at the end of 2023 to 8.3% in April, and the growth rate of RMB loans of social finance fell from 10.4% to 9.1%.
When the financial data was weak, the domestic economy has stabilized and rebounded since the beginning of the year. GDP grew 5.3% year-on-year in the first quarter, driven by exports and manufacturing investment. Export data continued to pick up in April, with exports increasing by 1.5% year-on-year and -7.5% in the previous month. Compared with 2019, the revenue of Qingming and May Day cultural tourism increased by 12.7% and 13.5% year-on-year, which also shows that the current household consumption, especially service consumption, remains resilient.
The divergence of economic and financial data is a manifestation of the "de-financialization" of the economy. Traditional economic growth has relied on highly indebted sectors such as real estate and infrastructure. In the mode of corporate debt investment to drive the economy, credit growth and economic growth are closely related.
However, as the debt-driven economic growth model such as real estate passes, heavy industries that rely on credit funds tend to be saturated, and the proportion of asset-light services continues to increase, and credit will also enter a shift cycle. As economic growth becomes less reliant on credit, even if credit growth is lower than before, it is enough to support a steady economic growth.
For example, credit growth in the first quarter mainly relied on the service industry, and the new medium and long-term loans for industry, infrastructure, service industry, and real estate were 1.6, 2.0, 4.6, and 0.9 trillion yuan in the first quarter, with year-on-year changes of -2900, -1900, 7900, and 160 billion yuan.
As credit enters a shift cycle, the leadership and correlation of both the credit cycle and the economic cycle weaken. When the credit data is high, the economy is not necessarily strong, and when the credit data is low, it does not mean that the economy will weaken. The market should pay more attention to the price and quantity signals conveyed by the economic data itself.
Finally, expectations of fiscal and monetary synergy are heating up.
Since the beginning of the year, the fiscal policy has been relatively absent, and the net financing scale of government bonds from January to April has dropped by 44% year-on-year.
The April Politburo meeting clearly stressed the need to "issue and make good use of ultra-long-term special treasury bonds as soon as possible, accelerate the issuance and use of special bonds, and maintain the necessary intensity of fiscal expenditure." The National Development and Reform Commission also said that it has completed the screening of local government special bond projects in 2024, laying a solid project foundation for the issuance and use of 3.9 trillion yuan of special bonds this year.
It is expected that the progress of government bond issuance is expected to accelerate from May, and with the implementation of special bond projects and the promotion of the physical operating rate, the fiscal policy may increase its support for the economy. At the same time, with the issuance of government bonds, the growth rate of subsequent social finance is expected to improve.
When the issuance of government bonds is accelerated, considering that the previous Politburo meeting stated that "policy tools such as interest rates and reserve requirement ratios should be used flexibly", it is expected that the central bank will cooperate with the issuance of government bonds by cutting the reserve requirement ratio and other measures to stabilize the market capital.
Article source丨Xuetao macro notes
Editor-in-charge丨Ding Kaiyan, Lan Yinfan
Preliminary trial丨Xu Lanying
Final Review丨Zhang Wei
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