The balance of RMB deposits reached 295.51 trillion yuan, and the broad money su

Since November 2023, the growth rate of RMB deposits has been declining for five consecutive months; as of the end of March, the broad money supply was 304.8 trillion yuan.

On the afternoon of April 12, the People's Bank of China (hereinafter referred to as "the central bank") released the financial statistics for March.

The data shows that in March, new credit increased by 3.1 trillion yuan, which is 800 billion yuan less than the same period last year; the new social financing scale in March was 4.87 trillion yuan, which is 514.2 billion yuan less than the same period last year. At the same time, the increases in credit and social financing were both higher than the market forecast values.

"The significant year-on-year decline in credit this time, apart from the base effect, also reflects that the demand for entity financing is still weak," said Ming Ming, Chief Economist at CITIC Securities. Lin Yingqi, a banking analyst at CICC, also wrote that the recovery of credit demand is still not obvious.

Regarding the year-on-year decrease in social financing, Lin Yingqi said that in addition to the impact of loans, it was also due to a year-on-year decrease of 137.3 billion yuan in government bonds. "It is expected that the issuance of government bonds will accelerate in the second quarter, coupled with a slight recovery in credit year-on-year, which will help stabilize the growth rate of social financing."

Recently, the central bank has been vigorously promoting the construction of the counter bond market, supporting residents and enterprises to invest in interbank bond market products through counter channels. "It is expected that in the future, as the direct purchase of bonds by enterprises and residents increases, the proportion of direct financing is expected to further increase, and the growth rate of social financing scale will also be higher than the credit growth rate," said a person close to the central bank.

It is worth noting that data from Wind (Wangde) shows that the growth rate of RMB deposits in March was 7.9%, a new low since February 2019. Since November 2023, the growth rate of RMB deposits has been declining for five consecutive months. In the first quarter of 2024, RMB deposits increased by 11.24 trillion yuan, which is 4.15 trillion yuan less than the same period last year.

As of the end of March, the broad money supply (M2) was 304.8 trillion yuan, with a year-on-year growth of 8.3%, and the growth rate decreased by 0.4 percentage points month-on-month. Many analysts believe that this is related to the continuous decline in deposit interest rates, and some deposits have flowed into financial management and bond funds.Data indicates that since the beginning of the year, the overall growth of credit has been moderating. In the first quarter, new credit amounted to 9.46 trillion yuan, which is 1.14 trillion yuan less than the same period last year. Among this, new credit in March was 3.1 trillion yuan, 800 billion yuan less than the same period last year. By the end of March, the balance of RMB loans was 247.05 trillion yuan, with a year-on-year growth of 9.6%, which is 0.5 percentage points lower than the end of the previous month and 2.2 percentage points lower than the same period last year.

Looking at the structure, the pattern of strong corporate and weak household loans continues. In the first quarter, new household loans were 1.33 trillion yuan, while new corporate loans were 7.77 trillion yuan, with corporations remaining the main driver of credit growth. Specifically, in March, new household loans were 940.6 billion yuan, 304.1 billion yuan less than the same period last year; new corporate loans were 2.34 trillion yuan, 360 billion yuan less than the same period last year.

"The decrease of 304.1 billion yuan in household loans, of which short-term household loans decreased by 118.6 billion yuan, is mainly due to the weak growth of consumer credit. The long-term household loans decreased by 183.2 billion yuan year-on-year, mainly due to the sluggish real estate transactions," said Lin Yingqi.

"From a structural perspective, household loans remain weak, and the decline in the willingness of residents to purchase homes will continue to affect long-term household loans; in terms of corporate loans, long-term loans have turned negative year-on-year, but considering the continued effect of loan allocation policies in key areas, the prosperity of credit allocation in key areas such as infrastructure and advanced manufacturing is expected to remain at a high level," Ming Ming stated.

The People's Bank of China's monetary policy report for the fourth quarter of 2023 emphasized that the acceleration of China's economic structural transformation requires high-quality credit allocation: on one hand, loans to new drivers continue to grow rapidly; on the other hand, the growth momentum of traditional driver loans such as real estate and local financing platforms is slowing down. Combined, the overall credit growth rate may decline compared to the past, but the quality and efficiency of financial services to the real economy have significantly improved.

How to accurately grasp the laws and new characteristics of money and credit supply and demand? The central bank proposed three focuses: first, to pay more attention to the effectiveness of interest rate reductions; second, to focus more on the financial support strength for key areas such as scientific and technological innovation, green development, and small and micro enterprises; and third, to focus more on the scale of social financing that includes direct financing.

Data shows that in March, the loan interest rates for enterprises and personal housing loans were both around 3.7%, which is about 0.2 and 0.4 percentage points lower year-on-year, respectively, with loan interest rates in key areas and weak links declining even more. Looking at the data from major banks, the year-on-year growth rate of long-term loans for manufacturing, inclusive small and micro loans, and green loans is generally maintained at 20%-30%, all of which are faster than the overall loan growth rate.The growth rate of social financing is expected to gradually rise

Against the backdrop of a slowdown in credit growth, social financing has also seen a year-on-year decrease in increments.

In the first quarter, the cumulative increase in social financing scale was 12.93 trillion yuan, 1.61 trillion yuan less than the same period last year. Among them, the new social financing in March was 4.87 trillion yuan, a year-on-year decrease of 514.2 billion yuan.

By the end of March, the stock of social financing was 390.32 trillion yuan, a year-on-year increase of 8.7%, down 0.3 percentage points from the previous month, reaching a historical low.

In terms of structure, the main drivers of social financing growth are RMB loans issued to the real economy and net financing of government bonds. In the first quarter, the two increased by 9.11 trillion yuan and 1.36 trillion yuan respectively, both showing a year-on-year decrease.

Ming Ming said that this is mainly due to the slowdown in credit growth, the lag in government bond issuance, and the slowdown in equity financing. "Considering that special treasury bonds are expected to be issued in the second quarter, local government bond financing may accelerate, and other factors accumulate, coupled with the base effect, the growth rate of social financing is expected to rise gradually."

According to the "Notice on Matters Related to the Counter Business of the Interbank Bond Market" issued by the central bank earlier, from May 1, individuals and enterprises will be able to directly invest in interbank bond market varieties through the counter channel, including government bonds, local government bonds, financial bonds, corporate credit bonds, etc.

In this regard, the person close to the central bank mentioned earlier said that under the current background of M2 exceeding 300 trillion yuan, vigorously developing direct financing is conducive to more targeted satisfaction of financing needs with different characteristics, shortening the financing chain, improving financing efficiency, and optimizing the financing structure. "The central bank vigorously promotes the development of counter bond business by banks, and it is expected that in the future, as the direct purchase of bonds by enterprises and residents increases, the proportion of direct financing is expected to further increase, and the growth rate of the social financing scale will also be higher than the credit growth rate."

In addition, the market has recently been hotly discussing the central bank's open market operations to increase the buying and selling of government bonds. Historically, the central bank tried to buy and sell government bonds in 1997, but due to the lack of market depth and breadth, it was soon stopped. Over the years, China's government bond market has continued to develop and made significant progress, providing conditions for the central bank to carry out spot bond buying and selling operations.

According to authoritative expert analysis, in the future, the central bank may include the buying and selling of government bonds in the policy tool reserve, enriching the liquidity management toolbox; but the overall monetary and financial conditions will still maintain a reasonable and moderate level, which is fundamentally different from the actions of the European and American normal monetary policies that have been exhausted and have to buy a large amount of government bonds.The growth rate of deposits has been declining for five consecutive months

Credit and social financing both saw a decrease, and the pace of monetary expansion has also slowed down.

As of the end of March, the M2 balance was 304.8 trillion yuan, an increase of 8.3% year-on-year. The M1 (narrow money) balance was 68.58 trillion yuan, an increase of 1.1% year-on-year.

Among them, the growth rate of M2 was the lowest since the fourth quarter of 2021, falling back to the level before the pandemic.

"As the domestic economy continues to recover and improve, M2 has moderately fallen from the high-growth state of the pandemic response, which is reasonable and normal," said a person close to the central bank. "This reflects that the behavior of bank asset expansion and money creation is moving towards a more robust, balanced, and sustainable track. It is also related to the activation of capital turnover and circulation, and the alleviation of idle funds under the background of the economic recovery and improvement."

Lin Yingqi said that since the beginning of the year, the slowdown in the growth rate of M2 has been more obvious, mainly due to the downward trend in bond market interest rates, and the better performance of wealth management and bond funds, coupled with the decline in returns after the interest rate cut on deposits at the end of last year, some deposits have flowed into wealth management and bond funds.

Mingming also said that the end of the quarter is usually the time when wealth management funds transfer to deposits, but this year in March, the strength of wealth management funds returning to the table is not as strong as in recent years. After the continuous decline in deposit interest rates, the pace of monetary expansion has slowed down.

Wind data shows that since November 2023, the growth rate of RMB deposits has been declining for five consecutive months. As of the end of March, the balance of RMB deposits reached 295.51 trillion yuan, an increase of 7.9% year-on-year, and the growth rate was the lowest since February 2019.

In March 2024, RMB deposits increased by 4.8 trillion yuan, a decrease of 91 billion yuan year-on-year. Among them, the increase in residents' deposits in March was 4.8 trillion yuan, a decrease of 7.74 billion yuan year-on-year; the increase in corporate deposits was 2.07 trillion yuan, a decrease of 53.3 billion yuan year-on-year.

"Under the background of cracking down on 'idle capital turnover', the situation of large enterprises using credit funds for arbitrage has decreased, which also leads to the decline in the growth rate of M2," said Lin Yingqi.The M2-M1 spread, which measures the degree of currency activation (the difference between the growth rates of M2 and M1), has also narrowed. As of the end of March, the M2-M1 spread was 7.2%, down by 0.3 percentage points from the end of the previous month and 0.4 percentage points from the same period last year.

It is worth mentioning that for the first time, M2 exceeded 300 trillion yuan at the end of March, which has already attracted some attention.

In this regard, the aforementioned person close to the central bank stated that the total amount of M2 breaking through 300 trillion yuan reflects that the financial support for the real economy is sufficient and strong. "The huge stock of resources in the hands of enterprises and residents has laid the foundation for promoting investment, consumption, and the overall economic recovery to improve," said the person, adding that it is also important to recognize that the scale of the financial total amount is indeed not small. With the acceleration of economic recovery, structural transformation and upgrading, and the further cultivation of new drivers, the efficiency of using existing financial resources will be significantly improved, which is conducive to balancing stable growth and risk prevention.