Chief Economist of Guosheng**, Director of China Chief Economist Forum, Dr. Xiong Yuan
Guosheng** macro analyst, Mu Renwen
Events:On February 8, the People's Bank of China (PBOC) released the Report on the Implementation of China's Monetary Policy for the Fourth Quarter of 2023 (hereinafter referred to as the "Report"). On February 9, the People's Bank of China (PBOC) released the data on credit union financing in January 2024, and the new RMB loans in January 2024 were 492 trillion, expected 467 trillion, compared to 4 in the same period last year9 trillion; Added 65 trillion, expected 579 trillion, 60 trillion; The growth rate of stock social finance was 95%, the previous value was 95%；m2 year-on-year 87% and 9 expected3%, the previous value was 97%；m1 year-on-year 59%, the previous value was 13%。
Core Conclusions:In January, the scale of credit cooperatives exceeded expectations and seasonality, and the structure also improved, and the supporting financing of the "three major projects" such as consumer loan impulse, second-hand housing sales and PSL may be the main driver; There are six major signals in the fourth quarter monetary policy implementation report, including more prominent financing functions of the bond market, new mention of "reducing excessive attention to monthly monetary and credit high-frequency data", new mention of three "to see more", new mention of "promoting necessary market-oriented clearance" in terms of improving loan efficiency, and residential mortgage interest rates continue to hit new lows. Looking ahead, continue to prompt: stable growth, stable confidence, and stable prices urgently need to be increased by policies, specific to the monetary side, easing or the general direction, and the probability of interest rate cuts is very fast (MLF interest rates, LPR).
Report Summary:
1. In January, the scale of credit cooperatives "exceeded expectations" and the structure also improved, mainly due to three main reasons: the impulse of consumer loans, the strong sales of second-hand houses, and the improvement of policy supporting financing such as the "three major projects" such as PSL.
Credit:4. New credit was added in January92 trillion, an increase of 20 billion year-on-year, higher than the expected 467 trillion, also significantly higher than the seasonal 415 trillion. Among them, residents' short-term loans increased by 352.8 billion yuan, an increase of 318.7 billion yuan year-on-year, which is significantly better than seasonal, which may be related to the impulse of banks to reduce consumer loan interest rates; Residents' medium and long-term loans increased by 627.2 billion yuan, an increase of 404.1 billion yuan year-on-year, but new home sales were still weak in the same period, which may be related to the improvement of second-hand housing transactions, and operating loans may also contribute. Short-term loans to enterprises increased by 146 trillion, a year-on-year decrease of 50 billion; bill financing decreased by 973.3 billion, a significant decrease of 560.6 billion yuan year-on-year, which may be related to the increase in credit and the crowding out of the quota; Medium and long-term loans to enterprises increased by 331 trillion, a year-on-year decrease of 190 billion, mainly due to the high base in 2023, but still significantly better than seasonal, "three major projects" and other related supporting financing may still be the main reason for the high growth of long-term loans of enterprises.
Social Finance:In January, 6 new social finance was added5 trillion, an increase of 506.1 billion year-on-year, significantly better than expected, also higher than seasonal; The growth rate of stock social finance was the same as that of the previous month, at 95%。Among them, the RMB loans of social financing caliber increased by 484 trillion, a year-on-year decrease of 91.3 billion; **Bonds increased by 294.7 billion, a year-on-year decrease of 119.3 billion, which may be related to the centralized delivery of PSL and the landing of additional treasury bond funds in the same period, resulting in a slowdown in the pace of bond issuance. corporate bonds increased by 483.5 billion, an increase of 319.7 billion year-on-year, mainly due to the low base in 2023; Off-balance sheet financing increased by 600.8 billion yuan, an increase of 252.3 billion yuan year-on-year, of which undiscounted bank acceptance bills increased significantly year-on-year, which was the main driving item, which may be related to the decline in the scale of discount of on-balance sheet bills.
m1/m2：The growth rate of M1 has risen sharply, mainly due to the dislocation of the Spring Festival, and the actual activation of corporate funds remains to be observed; M2 fell sharply year-on-year, mainly due to the high base caused by financial redemption and high credit growth in the previous year.
2. Six major signals from the central bank's monetary policy implementation report in the fourth quarter of 2023:
Signal 1:The central bank is still worried about the global economy, believing that "the global economic recovery will further diverge, the future global economic growth momentum will slow down, and political and geopolitical risks will rise". He is more confident in the domestic economy, believing that "China's economy is expected to further rebound in 2024", but also pointed out that "some difficulties and challenges need to be overcome", including the lagged impact of high interest rates in overseas economies, the first year of disturbance, and weak domestic expectations.
Signal 2:The central bank's concern about overseas inflation has declined, believing that "inflationary pressure in advanced economies has generally eased" and that "inflation will continue to decline slowly" in the future. The central bank believes that China's current price level is low, mainly due to "insufficient effective economic demand and unsynchronized recovery of aggregate supply and demand", and in the future, "with the gradual weakening of the base effect and the continuous recovery of demand for goods and services, prices are expected to rise moderately".
Signal 3:The monetary policy tone basically continues the deployment of major meetings since the end of the year, such as the Economic Work Conference, including "a prudent monetary policy should be flexible, moderate, precise and effective", etc., and the main changes are: more prominent financing functions of the bond market; In terms of improving the efficiency of loan use, "promote the necessary market-oriented liquidation" has been added. Continue to prompt: monetary easing in 2024 is still the general direction, and there is a high probability that interest rates will be cut in the future (MLF interest rate reduction, LPR), and credit should also pay more attention to revitalizing stocks and structural adjustment, especially tilting towards the "5 major articles" such as science and technology finance.
Signal 4:It further elaborated on "grasping the balance of interest rates", aiming to prevent capital idling and reduce costs.
Signal 5:In 2023, the weighted average interest rate of loans in Q4 will fall back to below 4%, and the interest rate of residential mortgages will continue to hit a new low.
Signal 6:The column "Accurately Grasping the Law and New Characteristics of Monetary and Credit Supply and Demand" has new formulations, including: reducing excessive attention to monthly high-frequency monetary and credit data; The evaluation of financial support should not be "only credit increment", but should be "more to look at", that is, to look more at "the effect of interest rate reduction", to look more at "the strength of financial support in key areas", and to look more at "the scale of social financing covering direct financing, or to observe the cumulative increase and balance growth over a long period of time".
3. Looking ahead, continue to prompt: the current problems of insufficient economic demand, lack of confidence, and weak internal vitality are still prominent, and policies are urgently needed to stabilize growth, confidence, and prices; Specific to the monetary side, easing is still the general direction, the probability of interest rate cuts is very fast, and there are four points to pay attention to in the short term, especially the possible interest rate cuts in the near future.
Comprehensive January prices, PMI, meso and other indicators, all point to the current economic repair foundation is not yet solid, especially resident consumption, real estate, etc. are still weak, indicating that stable growth, stable confidence, stable prices still need to be increased by policy, specific to the monetary side, easing or the general direction, interest rate cuts are likely to be very fast (MLF interest rate, LPR).
In the short term, there are four major concerns: 1) possible interest rate cuts in the near future (MLF interest rate, LPR); 2) the pace of follow-up fiscal development, including special bonds, special refinancing bonds, quasi-fiscal instruments such as PSL and policy-based financial instruments; 3) the effect of stabilizing real estate policies, especially real estate sales; 4) The expression of the policy on the idling of funds.
Report Body:
1. Three major signals of credit union financing data in January
Event: New RMB loans in January 202444492 trillion, expected 467 trillion, compared to 4 in the same period last year9 trillion; Added 65 trillion, expected 579 trillion, 60 trillion; The growth rate of stock social finance was 95%, the previous value was 95%；m2 year-on-year 87% and 9 expected3%, the previous value was 97%；m1 year-on-year 59%, the previous value was 13%。
Signal 1: The scale of new credit exceeded expectations, and it was also significantly better than seasonal, and the structure also improved. Specifically, resident loans increased sharply year-on-year, and short-term loans and medium- and long-term loans both increased year-on-year, which may be related to the impulse of consumer loans and the improvement of second-hand housing transactions; The short-term loans and bill financing of enterprises weakened in different ranges, which may be related to the decline in impulse demand, and the medium and long-term financing increased slightly year-on-year, but still better than seasonal.
In terms of total volume, there was 492 trillion, an increase of 20 billion year-on-year, higher than the expected 467 trillion, also significantly higher than the seasonal 415 trillion (average of 415 trillion yuan), of which: 980.1 billion new resident loans, an increase of 722.9 billion yuan year-on-year; Corporate loans increased by 386 trillion, a year-on-year decrease of 820 billion; Non-bank loans increased by 24.9 billion yuan, an increase of 83.4 billion yuan year-on-year.
Residential loans increased sharply year-on-year, which was also better than seasonal, and short-term loans and medium- and long-term loans both increased year-on-year, which may be related to bank impulse and improved second-hand housing transactions. In January, residents' short-term loans increased by 352.8 billion yuan, an increase of 318.7 billion yuan year-on-year, which was significantly better than the seasonal (the average value of the same period in the past three years was 154.2 billion yuan), which may be related to the impulse of banks to reduce consumer loan interest rates; Residents' medium and long-term loans increased by 627.2 billion, an increase of 404.1 billion year-on-year, but new home sales were still weak in the same period (the sales area of commercial housing in 30 large and medium-sized cities in January was -47%), which may be related to the improvement of second-hand housing transactions (on a comparable basis, the sales area of second-hand housing in January 13 cities increased by 227%), operating loans may also contribute.
The contraction of short-term financing of enterprises, short-term loans and bill financing have weakened in different ranges, which may be related to the decline in impulse demand, and the medium and long-term financing has increased slightly year-on-year, but it is still better than seasonal, and policy promotion may still be the main reason. Short-term corporate loans increased by 146 trillion, a year-on-year decrease of 50 billion; bill financing decreased by 973.3 billion, a significant decrease of 560.6 billion yuan year-on-year, which may be related to the increase in credit and the crowding out of the quota; Medium and long-term loans to enterprises increased by 331 trillion, a year-on-year decrease of 190 billion, mainly due to the high base in 2023, but still significantly better than the seasonal (average of the same period in the past three years is 2.).55 trillion). In January, the BCI enterprise investment prospect index improved, but it was not significant, and it is expected that the "three major projects such as affordable housing" will issue trillions of treasury bonds at the end of the year, and related supporting financing may still be the main reason for the high growth of medium and long-term loans of enterprises.
Signal 2, the scale of new social financing is significantly better than expected, also higher than seasonal, corporate bond financing, undiscounted bank acceptance bills improvement is the main driver, the growth rate of the stock of social finance is the same as the previous month, 95%。
The total amount to look at,In January, 6 new social finance was added5 trillion, an increase of 506.1 billion year-on-year, significantly better than expected (market expectation 5.79 trillion), which is also higher than seasonal (the average for the same period in the past three years is 5.).790,000); The growth rate of stock social finance was the same as that of the previous month, at 95%。
Look at the structure,In January, RMB loans of social financing increased by 484 trillion, a year-on-year decrease of 91.3 billion; **Bonds increased by 294.7 billion, a year-on-year decrease of 119.3 billion, which may be related to the centralized delivery of PSL and the landing of additional treasury bond funds in the same period, resulting in a slowdown in the pace of bond issuance. corporate bonds increased by 483.5 billion, an increase of 319.7 billion year-on-year, mainly due to the low base in 2023; Off-balance sheet financing increased by 600.8 billion yuan, an increase of 252.3 billion yuan year-on-year, of which undiscounted bank acceptance bills increased significantly year-on-year, which was the main driving item, which may be related to the decline in the scale of discount of on-balance sheet bills.
The growth rate of signal 3 and M1 has risen sharply, mainly due to the dislocation of the Spring Festival; M2 fell sharply year-on-year, mainly due to the high base caused by financial redemption in the previous year.
M1 in January was 59%, a sharp increase of 4 from the previous month6 percentage points, mainly due to the fact that last year's Spring Festival was in January and the issuance of corporate bonuses led to the conversion of corporate demand deposits into resident deposits, while this year's Spring Festival was in February, and the corresponding corporate deposits were converted to resident deposits less; m2 year-on-year 87%, a sharp drop of 1 percentage point from the previous month, mainly related to the expansion of credit in 2023 and the high growth of residents' deposits (62 trillion) led to a high base. On the deposit side, deposits increased by 5 in January48 trillion, a year-on-year decrease of 139 trillion, of which, resident deposits increased by 253 trillion, a significant decrease of 3 year-on-year67 trillion, mainly due to the adjustment of the bond market in January 2023, which triggered the redemption of residents' wealth management into deposits.
Six signals from the second and fourth quarter monetary policy implementation reports
Event: On February 8, the People's Bank of China (PBOC) released the Report on the Implementation of China's Monetary Policy for the Fourth Quarter of 2023 (hereinafter referred to as the "Report"), with four columns: "Accurately Grasping the Law and New Characteristics of Money and Credit Supply and Demand", "Ten Years of Interest Rate Self-Discipline Mechanism: An Important Guarantee for Market-oriented Reform", "Steadily Promoting Bilateral Local Currency Swaps between Central Banks", and "Further Deepening Financial Cooperation between the Mainland and Hong Kong".
Signal 1: The central bank is still worried about the global economic situation, believing that "the global economic recovery will further diverge", and the global "economic growth momentum will slow down" and "political and geopolitical risks will rise" will also restrict global economic growth; He still has confidence in the domestic economy, believing that "China's economy is expected to further rebound in 2024", but also pointed out that "some difficulties and challenges need to be overcome", including the lagged impact of high interest rates in overseas economies, the first year of disturbance, and weak domestic expectations.
For the global economy, the central bank believes that the global "economic recovery is further divergent", and the U.S. economy is running smoothly as a whole, but the weak performance of the European economy and the contraction of Japan's GDP in the third quarter "form a strong contrast with the recovery trend in the first half of the year". Looking ahead, the central bank pointed out that one of the important reasons for economic resilience in 2023 is the "cumulative effect of the previous stimulus policy", and in the future, as the policy effect continues to fade and the effect gradually emerges after interest rate hikes, "economic growth momentum will slow down". In addition, "rising political and geopolitical risks constrain economic growth".
For the domestic economy, the Q3 report pointed out that "there are many favorable factors for the economy to maintain stable development", and the Q4 report pointed out that "China's economy is expected to further rebound and improve" in 2024, pointing to the central bank's more confidence in China's economy, mainly due to "investment continues to strengthen, consumption improves steadily, and foreign trade resilience is strong". At the same time, the central bank also pointed out that "the sustained economic recovery also needs to overcome some difficulties and challenges", including overseas "the lagged impact of high interest rates in the economy continues to appear", "the uncertainty of the world political and economic situation may increase" in the first year, and the domestic "economic cycle is blocked, and social expectations are still weak". In the medium term, the central bank also pointed out that "China's development is still in an important period of strategic opportunities, with a broad market space, a complete industrial system, a strong material and technological foundation, a continuous enhancement of talent dividends, and good support for economic development."
Signal 2: The central bank's concern about overseas inflation has dropped significantly, believing that "inflationary pressure in developed economies has generally eased" and that global "inflation will continue to decline slowly" in the future; The central bank believes that China's current price level is low, mainly due to "insufficient effective economic demand, aggregate supply and demand recovery is not synchronized", and in the future, "with the gradual weakening of the base effect and the continuous recovery of demand for goods and services, prices are expected to rise moderately", and continue to emphasize that "there is no basis for long-term deflation or inflation in China". Looking ahead, continue to prompt: CPI is expected to turn positive slightly in February 2024, and PPI will turn positive around Q2 at the earliest; The full-year 2024 pivot is likely to be slightly lower than previously expected.
For global inflation: The central bank believes that "inflationary pressures in advanced economies have generally eased", and the "still sticky" has been removed from the Q3 report, pointing to the decline in the central bank's concern about overseas inflation. The central bank pointed out that the global ** chain has basically recovered, consumer demand has also cooled, and advanced economies "inflation is likely to continue to fall", but considering the stickiness of service inflation, geopolitical conflicts, etc., global inflation "is still a relatively slow process", and cited the IMF's ** as evidence (IMF** global inflation level will fall to 5 in 20248%, but inflation in most economies will not fall back into the target range until 2025).
For China's inflation: The central bank pointed out that "inflation fundamentally depends on the balance of supply and demand in the real economy", and the current price level in China is low, mainly due to "insufficient effective demand and unsynchronized recovery of aggregate supply and demand". In the future, as the base effect gradually weakens and the demand for goods and services continues to recover, China's "prices will generally show a moderate upward trend". In the medium and long term, China is in a critical period of economic recovery and industrial transformation and upgrading, supply and demand conditions are expected to continue to improve, monetary conditions are reasonable and moderate, residents' expectations are stable, and "there is no basis for long-term deflation or inflation".
Signal 3, the monetary policy tone basically continues the deployment of major meetings since the end of the year, such as the Economic Work Conference, including "a prudent monetary policy should be flexible, moderate, precise and effective", etc., the main changes are: more prominent financing function of the bond market; In terms of improving the efficiency of loan use, "promote the necessary market-oriented liquidation" has been added. Continue to prompt: monetary easing in 2024 is still the general direction, and there is a high probability that interest rates will be cut in the future (MLF interest rate cuts, LPR), and credit should also pay more attention to revitalizing stocks and structural adjustments, especially to the "five major articles" such as science and technology finance, green finance, and pension finance.
First, the overall tone is basically the same as in 202312.12** Economic Work Conference, 202312.28 Central Bank Fourth Quarter Meeting, 202401.05 The central bank's work conference and other statements, including: a prudent monetary policy should be flexible, moderate, precise and effective; Maintain the scale of social financing and the amount of money to match the expected target of economic growth and the highest level; Adhere to the focus on key points, reasonable and moderate, advance and retreat, and do a good job in science and technology finance, green finance, inclusive finance, pension finance, digital finance and other five major articles.
Second, emphasizing "reasonably grasping the relationship between the two largest financing markets of bonds and credit", mainly refers to two aspects, one is to strengthen coordination and cooperation with fiscal policies, ensure the smooth issuance of ** bonds, and continue to promote the development of corporate credit bonds and financial bond markets, and the other is to support financial institutions to actively tap credit demand and project reserves around the nine key tasks, and take multiple measures to promote the reasonable growth of loans. On the whole, the importance of the financing function of the bond market should be increased.
Third, in terms of focusing on improving the efficiency of loan use, it is required to "transfer some loans to more efficient business entities after maturity, optimize the investment direction of new loans, and promote necessary market-oriented liquidation, so as to provide better support for sustainable economic development", of which "promote necessary market-oriented liquidation" is a new expression. In addition, the core of "supporting the use of debt restructuring and other means to revitalize the credit stock and improve the efficiency of the use of existing loans" should be to carry out structural adjustments to the existing loans through debt restructuring and other means, so as to free up funds from inefficient areas (such as real estate, urban investment, etc.) and transfer them to more efficient business entities.
Signal 4 further elaborates on "grasping the equilibrium of interest rates", aiming to prevent capital idling, stabilize the cost of bank liabilities, and promote the decline of real financing costs. According to the report, grasping the balance of interest rates is reflected in three aspects: first, improve the formation and transmission mechanism of market-oriented interest rates, improve the policy interest rate system of the central bank, and guide market interest rates to fluctuate around policy interest rates. The second is to implement the market-oriented adjustment mechanism of deposit interest rates, and strive to stabilize the cost of bank liabilities. The third is to give full play to the efficiency of the loan market interest rate reform, strengthen the self-discipline and coordination and management of the industry, urge financial institutions to adhere to the principle of risk pricing, straighten out the relationship between loan interest rates and bond yields and other market interest rates, and promote the steady and moderate reduction of comprehensive social financing costs.
The weighted average interest rate of loans fell below 4% in the fourth quarter of the signal, and the interest rate of residential mortgages continued to hit a new low. According to the report, the weighted average interest rate of new loans issued in December 2023 was 383%, falling below 4% for the first time, down 031 percentage points, of which: the weighted rate of corporate loans is 375%, down 007 percentage points; The interest rate for personal housing loans for residents is 397%, down 005 percentage points, continuing to hit a new low. Looking ahead, driven by policies, the financing costs of residents and enterprises are expected to fall further.
Signal 6, column "Accurately grasp the law and new characteristics of money and credit supply and demand" has a lot of new formulations, including: reducing excessive attention to monthly monetary and credit high-frequency data; The evaluation of financial support should not be "only credit increment", but should be "more to look at", that is, to look more at "the effect of interest rate reduction", to look more at "the strength of financial support in key areas", and to look more at "the scale of social financing covering direct financing, or to observe the cumulative increase and balance growth over a long period of time".
In response to the "accurate grasp of the law and new characteristics of money and credit supply and demand" proposed by the first financial work conference, the report set up a special column for analysis, which pointed out: first, the transformation of China's economic structure has been accelerated, requiring high-quality credit delivery; Second, the relationship between stock and increment is also changing, and more attention should be paid to revitalizing inefficient stock financial resources; Third, it is necessary to reduce excessive attention to the high-frequency data of monthly money and credit, mainly because "China's loan increment has obvious seasonal characteristics"; Third, it is necessary to accurately grasp the law and new characteristics of the supply and demand of money and credit, rationally evaluate the intensity of financial support, and solve the problem of "what to see."
In the stage of high-quality development, judging economic development is not only based on economic growth, but also on financial support. It is necessary to look more at the effect of the decline in interest rates, and the steady decline in social financing costs shows that the credit demand of the real economy is reasonably satisfied; It is necessary to look more at the financial support in key areas such as scientific and technological innovation, green development, and small, medium and micro enterprises, so as to better reflect the degree to which financial resources meet the effective demand of the real economy; It is necessary to look more at the scale of social financing covering direct financing, or to observe the cumulative increment and balance growth rate for a longer period of time, so as to take a more comprehensive view of monetary and financial conditions.
Risk warning: unexpected changes in policy strength and external environment.