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How to assess the degree of monetary policy accommodative in January 2024? The dual nature of economic data and financial data means that the implementation of monetary policy is not satisfactory. The monetary easing policy, which has lasted for 31 months, has entered the stage of tasting like chicken ribs. It is necessary to promote the second reform and opening up, and at the same time directly send money to the people to promote consumption, so as to improve the effect of monetary policy.
1. How to assess the degree of monetary policy easing in January 2024?
On February 9, the thirtieth day of the Chinese New Year's Eve, the central bank did not rest, as they released financial data for the first month of 2024 on this day. They say it's a very good statistic.
Therefore, most of the ** and since ** are based on "the financial data in January is off to a good start, the new RMB loan social finance has hit a record high, the financial data is off to a good start, and the social finance has increased by 6 in January."5 trillion yuan in the same period in history, the highest pace of credit delivery", to introduce the financial data in January.
As the saying goes, the layman looks at the excitement, and the insider looks at the doorway. The money in circulation, M2, the stock of social financing, and the new social financing in January did set a new record. Is this kind of data good? Does it work? Can it promote the healthy development of the economy? Before answering these questions, let's take a look at how to assess the degree of monetary policy easing this month.
Clause.
First, judging from the data, the degree of monetary easing has indeed set a new record.
At the end of January 2024, the balance of broad money (M2) was 29763 trillion yuan, compared with 273 at the end of January 202381 trillion yuan, an increase of 87%。The balance of narrow money (m1) is 6942 trillion yuan, compared with 65 in the same period last year52 trillion yuan, an increase of 59%。
At the end of January, the stock of social financing was 38429 trillion yuan, compared with 350 in the same period last year93 trillion yuan, an increase of 95%；The scale of social financing was added by 65 trillion yuan, an increase of 5 percent over the same period last year99 trillion yuan, an increase of 506.1 billion yuan, an increase of 85%。
Among them, 509 trillion, a year-on-year increase of 149%, and new loans to residents were 980.1 billion, a year-on-year increase of 28 times, ** new bonds of 294.7 billion, a year-on-year decrease of 288%。
On the face of the data, January's financial data did set a new record and got off to a good start.
But isn't it too simplistic to analyze complex financial and economic issues in this way? Is the extremely loose monetary data too dramatic conflict with the cold CPI, PPI, and Shanghai and Shenzhen indices in January?
Clause.
Second, behind the financial data that has made a good start, there are serious structural problems in the implementation of financial policies.
For example, new social financing has increased significantly, but new corporate financing has decreased significantly. Enterprises added 4 new social financing99 trillion, a year-on-year decrease of 54%。
For example, the proportion of high-cost off-balance sheet financing has risen sharply. Among the new financing of enterprises, low-cost on-balance sheet financing and direct financing439 trillion, a year-on-year decrease of 109%, accounting for 934% down to 88%. The high-cost off-balance sheet financing increased by 72.8 billion yuan to 600.8 billion yuan from 348.5 billion yuan in the same period last year4%。
Clause.
Third, the record high of new social financing may not be due to the increased demand for funds in the market, but simply because of the sharp increase in working days caused by the misalignment of the Spring Festival date.
The first day of the Lunar New Year in 2023 is January 22, and the deadline for financial institutions to lend is January 21. This year's Spring Festival is the first day of February 10, and the whole month of January is the lending day of financial institutions.
If we convert it into the average daily new social financing and loans, the daily average in January this year was 209.5 billion yuan, a year-on-year decrease of 265%；The daily new ** bonds were 9.5 billion yuan, a year-on-year decrease of 518%；The daily new corporate financing was 164 billion yuan, a year-on-year decrease of 222%。Resident loans alone increased by 31.6 billion yuan per day, an increase of 1 percent year-on-year59 times.
Second, the dual days of economic data and financial data mean that the implementation of monetary policy is not satisfactory.
Generally speaking, interest rate hikes will lead to a fall in prices, a contraction in real estate, and a downturn in the economy; Interest rate cuts will stimulate investment and consumption, the economy will heat up, prices, employment will increase, and assets will expand.
Prior to the central bank's release of financial data, the National Bureau of Statistics had already released the Purchasing Managers' Index (PMI), Consumer Price Index (CPI), Industrial Goods Factory** Index (PPI), and independent research institutes also released sales data for the top 100 real estate companies in January. These important macroeconomic data that have been published, without exception, are all below zero, in sharp contrast to the financial data that continues to grow sharply at nearly 100 degrees. This means that we need to take a hard look at how well monetary policy is being implemented.
First, the index of orders in hand and the employment index of enterprises in the PMI both contracted, and the market demand and employment did not improve.
The economic prosperity, contraction or expansion of an enterprise falls on the most basic indicator, which is the number of orders. The number of orders and the number of workers are interrelated and corroborate each other, which is the core data logic between the PMI index and the key indicators of the composition.
In January, the manufacturing new orders index was 490%, up 03 percentage points, which seems to indicate that the market demand for the manufacturing market has improved. But looking further, the manufacturing orders in hand index increased from 44 last month5% slipped to 443%, down 02 percentage points;
The manufacturing employment index rose from 47 in the previous month9% slipped to 476%, down 03 percentage points. With the decline in orders in hand and the decline in the number of workers, it is difficult to say that the economic prosperity of the manufacturing industry has improved.
The non-manufacturing new orders index was 476%, an increase of 01 percentage point, indicating that the decline in non-manufacturing market demand continued to narrow. But the non-manufacturing orders on hand index fell from 50 in the expansion zone last month9% slipped sharply to 45 in the contraction zone2%, down 57 percentage points; The employment index in the non-manufacturing sector increased from 47 in the previous month1% slipped to 47%, a drop of 01 percentage point. The non-manufacturing industry orders in hand have decreased sharply, and the employment index has also fallen, which means that the economic prosperity of the non-manufacturing industry is also continuing to decline.
Second, the price index, which measures the balance between supply and demand, continued.
In January, national household consumption** (CPI) fell by 08%, which is the fourth consecutive month of CPI year-on-year**, which has exceeded the standard of three consecutive months** of deflation observed by peers in the world. At the same time, the CPI also recorded the largest monthly year-on-year increase since the reform and opening up. Among them, what is even more unbelievable is that the hoarding of New Year's goods by residents before the Spring Festival every year has led to a sharp decline in the price of New Year's goods**. Food also hit the largest increase in January since the reform and opening up. Among them, pork *** 173%, beef *** 77%, lamb ***59%, aquatic products ***34%, fresh fruit ***91%。
In January, the national PPI fell by 25%, although the decline was 02 percentage points, but this is the 16th consecutive month of year-on-year decline in PPI. Among them, the means of production that flowed into other enterprises to continue production after leaving the factory fell by 30%, the means of living that flow into the retail market after leaving the factory ** decreased by 11%。
CPI and PPI continued**, which means that our corporate demand and retail market demand will continue to be weak before the Spring Festival, and the trend of oversupply will continue to exist and become more serious.
Third, the real estate market continues to be substantial.
On January 31, the China Index Institute, a professional research institution, released the sales performance ranking of China's real estate enterprises in January 2024. According to the data, the total sales of the top 100 real estate companies in January was 281.5 billion yuan, a year-on-year decrease of 333%, down 477%。
The sales revenue of the top 100 real estate companies in January this year decreased by 44% compared with January 2020, the first year of the epidemic8%, a decrease of 577%。ThisIt highlights that under the stimulus of continuous monetary easing, the sales of the real estate industry continue to be sluggish, which brings greater operating pressure to relevant real estate companies, and also brings development difficulties to other real estate-related industries, which may force real estate companies to reduce sales prices to accelerate capital turnover and cope with the dilemma of debt and interest repayment.
Third, the monetary easing policy, which has lasted for 31 months, has entered the stage of tasting like chicken ribs. It is necessary to promote the second reform and opening up, and at the same time directly send money to the people to promote consumption, so as to improve the effect of monetary policy.
It should be said that the People's Bank of China (PBOC) has started this round of monetary easing cycle of RRR and interest rate cuts since July 2021, when the People's Bank of China lowered the reserve requirement ratio for the first time in July 2021. In December of that year, the central bank cut the reserve requirement ratio again, while also cutting the one-year LPR by 5 basis points.
It has been 31 months since July 2021, during which the central bank has cut the reserve requirement ratio seven times and cut interest rates five times. The currency in circulation, M2, has increased from 231 in June 202178 trillion expanded to 29763 trillion, an increase of 284%, with an average monthly printing of 212 trillion; The stock of social financing increased from 301 months ago56 trillion pushed up to 38429 trillion, pushing up 274%, with an average monthly increase of macro debt of 267 trillion.
However, the monetary easing that lasted for 31 months did not reap the benefits of an overheated economy, but an overcooling economy, with CPI being negative for several months, PPI being negative for more than 10 months, and commercial housing sales being negative for 31 consecutive months. This is the first time in the decades since the reform and opening up that the economic situation has been in place.
Saburo believes that we need to realistically face the problems of the current monetary policy on the general oversupply, insufficient demand, declining corporate profitability, reduced employment opportunities, and declining residents' income and willingness to consume.
In the face of the current complicated economic situation, I am afraid that it can no longer be solved by following the previous countercyclical adjustment, monetary easing policy, and increasing fiscal debt.
There are some intricate problems in our macro economy, such as the debt problem of local investment and financing platforms, and the real estate debt problem, which is indeed more thorny and has begun to be revealed; For example, the problem of decoupling and de-risking, the population problem, and the shortage of demand caused by the distribution system have been mentioned many times in my economic analysis articles in the last two years; Another example is the debt-driven investment-oriented economic growth model, the mismatch of funds caused by the planned capital factor allocation system and market-oriented capital demand, and the impact on the effectiveness of monetary policy. These problems cannot be changed by monetary policy alone.
On the one hand, we must promote the second reform and opening up to be able to solve the above problems, and continue to cut the reserve requirement ratio and interest rates sharply to be effective.
On the other hand, monetary policy should not be done alone, fiscal policy should do something, stop those large amounts of duplicate investment and inefficient or even ineffective investment, stop and send money directly to the people, so as to promote consumption and digest excess supply.
Author: Xu Sanlang].