Despite the seemingly weak performance of social financing and credit in August based on data, their performance was in line with or even exceeded market expectations amid a lack of market confidence. The impact of "squeezing out the water" from current financial data continues to be evident, and a slowdown in the growth of social financing and credit may become the norm in the future, with a new pattern of social financing structure primarily supported by government bonds set to continue.
On September 13, the People's Bank of China released social financing and financial data for August. In August, new social financing increased by 3.03 trillion yuan, a year-on-year decrease of 96.8 billion yuan; the stock growth rate of social financing was 8.1%, a decrease of 0.1 percentage points month-on-month; new RMB loans increased by 900 billion yuan in August, a year-on-year decrease of 460 billion yuan; the year-on-year growth rate of RMB loans was 8.5%, a decrease of 0.2 percentage points month-on-month; the growth rate of M1 was -7.3%, a decrease of 0.7 percentage points month-on-month; the growth rate of M2 remained unchanged at 6.3% month-on-month.
In August, the stock growth rate of social financing fell month-on-month, with government bonds as the main support. In terms of loans, new RMB loans (social financing口径) increased by 1.04 trillion yuan in August, a year-on-year decrease of 300.1 billion yuan; in terms of off-balance-sheet items, entrusted loans were basically flat year-on-year, and trust loans increased by 70.5 billion yuan year-on-year; in the middle and late August, the rediscount rate of one-month bank bills of state-owned large banks and joint-stock banks continued to operate at a low level, falling below 0.5% at the end of August, reflecting that banks have a strong appetite for bills, with an increase of 47.8 billion yuan less than the same period last year for undiscounted bank acceptance bills.
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In terms of direct financing, in July, after the Central Political Bureau meeting proposed to "accelerate the issuance and use of special bonds and make good use of ultra-long-term special government bonds," the pace of government bond issuance accelerated. In August, new government bonds increased by 1.61 trillion yuan, an increase of 437.1 billion yuan year-on-year; based on this, it is expected that government bonds will continue to support the growth of social financing in the second half of the year.
The acceleration of government bond issuance drives the growth of social financing.
The main contribution to the increase in new social financing in August came from the acceleration of government bond issuance: new government bonds increased by 1.62 trillion yuan in August, an increase of 441.8 billion yuan year-on-year, accounting for 53% of new social financing; new RMB loans under the social financing口径 increased by 1.04 trillion yuan, a decrease of 300.1 billion yuan year-on-year.
In addition, off-balance-sheet financing increased by a cumulative 116 billion yuan, an increase of 15.5 billion yuan year-on-year; corporate bonds increased by 170.3 billion yuan, a decrease of 107.5 billion yuan year-on-year; net equity financing was 13.2 billion yuan, a decrease of 90.4 billion yuan year-on-year. Considering the current acceleration of government bond issuance and other factors such as the low base in the second half of 2023, it is expected that the growth rate of social financing will remain stable at 8% throughout 2024.
In August, new RMB loans increased by 900 billion yuan, a decrease of 460 billion yuan year-on-year on a high base, with corporate, residential, and non-bank loans all decreasing year-on-year. The demand for consumption and housing purchases by the residential sector is weak, and the business expectations of the corporate sector are not optimistic, with the willingness to invest in reproduction continuing to weaken. Overall, insufficient effective demand led to poor loan volume and structure in August.
From the perspective of enterprises, the growth of general loans is under pressure, and bill financing forms support. In August, the manufacturing PMI continued to fall month-on-month to 49.1%, with insufficient effective demand from the entity, and short-term corporate loans continued to decline year-on-year, with a decrease of 149.9 billion yuan; medium and long-term loans increased by 490 billion yuan in August, a decrease of 154.4 billion yuan year-on-year, with the stock growth rate decreasing by 0.25 percentage points month-on-month to 12.08%, of which, the growth rate of medium and long-term loans in manufacturing was 15.9%. With the increase in government bond issuance, it is expected that subsequent配套 medium and long-term financing will be driven.
From the perspective of residents, both short-term and medium and long-term loans are weak, and the cost of resident credit is expected to decrease. In August, resident loans decreased by 202.2 billion yuan year-on-year, of which, short-term loans and medium and long-term loans decreased by 160.4 billion yuan and 40.2 billion yuan year-on-year, respectively. The willingness of residents to consume continues to be low, and from January to August, the total retail sales of consumer goods continued to fall month-on-month, with real estate companies' sales vitality being weak. To increase the willingness of residents to leverage, it is still necessary to reduce the cost of resident credit, and it is expected that incremental monetary policy will be introduced one after another within the year.Breaking it down by sector, consumer spending and home purchase intentions in the household sector are sluggish, with weak demand for retail credit. In August, new household loans increased by 190 billion yuan, 202.2 billion yuan less than the same period last year; among them, new short-term household loans increased by 71.6 billion yuan, 160.4 billion yuan less than the same period last year; new medium and long-term household loans increased by 120 billion yuan, 40.2 billion yuan less than the same period last year.
Considering the core CPI in August, the total retail sales of consumer goods, and real estate sales, all indicate that under the condition of continuous adjustment of housing prices and weak expectations for employment and income, consumer spending and home purchase intentions in the household sector are sluggish, and financing demand is weak. At the same time, the current gap between the stock and new mortgage interest rates is also large, which promotes residents to continue to repay loans in advance, offsetting the increase in mortgage loans. The household sector is still in the stage of deleveraging, and the subsequent credit increase may still be limited.
On the other hand, due to poor business expectations, the willingness to invest in reproduction continues to weaken, and the phenomenon of bill volume is obvious. In August, new corporate loans increased by 840 billion yuan, 108.8 billion yuan less than the same period last year; among them, new short-term corporate loans decreased by 190 billion yuan, an increase of 149.9 billion yuan less than the same period last year; new medium and long-term corporate loans increased by 490 billion yuan, 154.4 billion yuan less than the same period last year.
Considering the performance of the manufacturing PMI and PPI in August, it reflects that the business expectations are still poor, and the willingness to invest in reproduction continues to weaken. In addition, in August, new bill financing increased by 545.1 billion yuan, an increase of 197.9 billion yuan more than the same period last year; accounting for 65% of new corporate loans, the phenomenon of bill volume is obvious. By the end of August, the bill rediscount once again showed a "zero interest rate", and the stock of bills maintained a positive growth, which also indicates that the weak demand situation continues.
Therefore, considering the current local government debt pressure and debt reduction requirements, it is highly likely that government bond issuance will continue in the future. Against the background of credit demand that still needs to be repaired, whether government bond issuance can drive the allocation of supporting corporate medium and long-term loans needs to be continuously observed.
The pain of loan conversion in the new and old kinetic energy fields is still present.
In August, the social financing growth rate slightly declined, and the data showed that the overall financing demand is still weak. The government bond increased year-on-year, which played a certain role in supporting the social financing growth rate. In terms of new credit, it is expected that in the short term, due to the lack of obvious rebound in demand and the impact of financial "water squeezing", the credit growth rate will still maintain a weak pattern. In terms of government sector financing, although the government bond financing in August has accelerated and increased year-on-year, the increase in fiscal deposits in August exceeded the increase in government bond issuance, and future attention still needs to be paid to the progress of fiscal policy and the trend of corporate medium and long-term loan growth.
The current credit performance is still weak, which is caused by the financial data "water squeezing", credit balanced allocation, and insufficient entity financing demand. The confidence of residents and enterprises needs to be further effectively stimulated. From a structural perspective, the current period is a period of conversion between new and old kinetic energy. Credit resources are inclined towards national strategic key areas and weak links. However, in the short term, the demand for loans in the new kinetic energy field is difficult to fully continue the scale of the decline in the traditional field. The pain of the new and old kinetic energy conversion still exists, which is prominently manifested as "government bonds reach a new high, and corporate bonds increase less year-on-year".
The data shows that in August, direct financing increased by 237 billion yuan year-on-year, which is still mainly due to the acceleration of government bond issuance (an additional 161.3 billion yuan in the month, the first in the same period of history, an increase of 441.8 billion yuan year-on-year), while corporate bonds and stock financing decreased by 108.5 billion yuan and 90.5 billion yuan year-on-year, respectively, forming a clear drag on social financing.
In August, off-balance-sheet financing increased by 15.6 billion yuan year-on-year, among which, non-standard improvements ( entrusted loans increased by 7.3 billion yuan less year-on-year, trust loans increased by 70.4 billion yuan more year-on-year), and undiscussed bank acceptance bills decreased by 47.7 billion yuan year-on-year. In August, off-balance-sheet bills were transferred to on-balance-sheet, and the total of "on-balance-sheet + off-balance-sheet" bills increased by 150.2 billion yuan year-on-year, and the stock growth rate increased by 0.83 percentage points year-on-year to 5.4% in August.Looking at the comparative relationship between the growth rates of M1 and M2, in August, the year-on-year growth rates of M1 and M2 were -7.3% (a decrease of 0.7 percentage points month-on-month) and 6.3% (unchanged month-on-month), respectively. The M2-M1 spread continued to widen, with the disintermediation of household deposits continuing.
In August, Renminbi deposits increased by 960 billion yuan year-on-year, with fiscal deposits and non-bank deposits being the main support, increasing by 567.5 billion yuan and 1.36 trillion yuan year-on-year, respectively. The reduction in bank deposit挂牌 rates at the end of July further promoted the diversion of household deposits to wealth management products. In August, household deposits increased by 77.7 billion yuan less year-on-year. Weak credit growth led to a reduction in derived deposits, with corporate deposits increasing by 539 billion yuan less year-on-year.
In August, M2 grew by 6.3% year-on-year, maintaining a high level with unchanged growth rate month-on-month. However, M1 decreased by 7.3% year-on-year, with the growth rate falling for five consecutive months, and the decline further widened by 0.7 percentage points compared to July. The further widening of M1's decline month-on-month is mainly due to two reasons: on the one hand, the suspension of "manual interest supplementation" since April has led to a continuous decline in corporate demand deposits and a gradual shift towards financial management; on the other hand, it reflects the continuous pressure on corporate cash flow under the current situation of increased fiscal revenue and expenditure pressure, and limited space for recovery in household consumption and housing purchases. From the perspective of the widening spread between M1 and M2 growth rates, the trend of deposit regularization is still continuing.
Although the performance of social financing and credit in August appears weak from the data, under the condition of insufficient market confidence, their performance is in line with or even exceeds market expectations. The impact of "squeezing out the water" from the current financial data is still continuously manifested. In the future, the slowdown in the growth of social financing and credit may become the norm, and the new pattern of social financing structure mainly supported by government bonds will continue, with the indicative role of total data further weakening.
When interpreting the financial data for August, the central bank summarized the progress and effectiveness of financial support for high-quality development and stated that it will adhere to a supportive monetary policy stance to create a good monetary and financial environment for economic recovery and improvement. With the Federal Reserve announcing a 50BP rate cut on September 18, which is the first rate cut since March 2020, it marks the shift of monetary policy from a tightening cycle to an easing cycle.
The overall tone of China's current monetary policy remains supportive. The impact of external rate cuts on domestic monetary policy space needs to be comprehensively considered in terms of risk-free interest rates and risk premiums. Although the current risk premium is still relatively high, under the background of declining social financing growth and insufficient credit demand, future domestic incremental policies and rate cut space are still expected.