At the beginning of 2024, China's financial data ushered in a "good start". According to the latest data released by the central bank, the volume of narrow money (M1)** increased by 5 year-on-year in January9%, an increase of 6 percent from the end of the previous month1 percentage point, an increase of 32 percentage points. This data indicates that the cash flow position of businesses and households has improved, and economic activity has increased.
M1 refers to the sum of cash and savings deposits in circulation, and its growth rate reflects the degree of easing of funds by enterprises and households. The sharp increase in M1 growth in January was mainly due to the following aspects:
First, the Spring Festival factor is promoted. The Spring Festival is the most important traditional festival in China, and it is also the peak consumption season. In order to meet the production and sales needs during the holiday season, enterprises often reserve funds in advance, resulting in an increase in demand deposits. At the same time, residents will also increase their cash holdings in order to buy Chinese New Year goods and distribute red envelopes, thereby pushing up the growth rate of M1.
The second is the recovery of the real estate market. The real estate market is one of the important pillars of China's economy and an important factor influencing the growth rate of M1. In recent years, due to factors such as regulatory policies and the epidemic, the real estate market has continued to slump, resulting in a continuous decline in M1 growth. However, with the marginal relaxation of regulatory policies and the optimization of epidemic prevention and control, the real estate market has shown signs of stabilization, housing prices in some cities have shown a trend, home buyers' confidence has recovered, and the return of funds from real estate development enterprises has accelerated, thereby driving the growth rate of M1 to rebound.
The third is the acceleration of expenditure. **Spending is an important driver of China's economy and an important supporting factor for M1 growth. In 2024, China** will continue to implement a proactive fiscal policy, increase support for infrastructure construction, people's livelihood security, scientific and technological innovation, and other fields, and will also accelerate the pace of fiscal spending and improve the efficiency of the use of fiscal funds, thereby increasing M1 growth.
Overall, the sharp increase in M1 growth in January is a positive sign for China's economic recovery and a good foundation for economic growth throughout 2024. However, we cannot ignore some potential risks and challenges, such as uncertainty about the global economic recovery, rising inflationary pressures, and volatility in financial markets. Therefore, we need to remain vigilant, continue to strengthen macroeconomic regulation and control, prevent and defuse financial risks, and promote sustained and healthy economic development.