What does it mean for China’s total M2 balance to exceed 300 trillion yuan?
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China’s first quarter financial data was released on the 12th. Money supply, new RMB loans, and the increase in social financing all maintained steady growth. It is worth noting that the total amount of broad money (M2) exceeded 300 trillion yuan (RMB, the same below).
At the end of March, China’s M2 balance had risen to 304.8 trillion yuan, which some believe reflects the full and strong financial support to the real economy.
People close to China’s central bank told reporters from China News Service that this has something to do with China’s financing structure and economic development stage in the past period. The huge stock of resources is in the hands of enterprises and residents, laying the foundation for promoting investment, consumption and the recovery of the entire macro economy.
“It would be great to be able to revitalize and use the stock of more than 300 trillion yuan.” The above-mentioned person said that we must see that the scale of the financial aggregate is indeed not small. With the acceleration of economic recovery, structural transformation and upgrading, and the further cultivation of new momentum, , the efficiency of use of existing financial resources will be significantly improved, which is conducive to the balance between stable growth and risk prevention.
In addition, under the current background of the total M2 exceeding 300 trillion yuan, vigorously developing direct financing will help to meet the financing needs of different characteristics, shorten the financing chain, improve financing efficiency, and optimize the financing structure. The People’s Bank of China has vigorously promoted the development of over-the-counter bond business by banks. It is expected that as companies and residents directly purchase bonds will increase in the future, the proportion of direct financing is expected to further increase.
Lian Ping, president of Guangkai Chief Industrial Research Institute, said that the growth rate of bond financing is expected to further increase in the future, and corporate bond issuance may continue to increase in volume. The freed-up bank credit can be used to meet other funding needs of enterprises and residents.
The 2023 Central Economic Work Conference proposed that the scale of social financing and money supply should match the expected goals of economic growth and price levels.
Judging from the first quarter data, at the end of March 2024, the M2 balance was 304.8 trillion yuan, a year-on-year increase of 8.3%; the social financing scale stock was 390.32 trillion yuan, a year-on-year increase of 8.7%. Combining the economic growth target of about 5% set in this year’s government work report and the consumer price increase target of about 3%, it can be seen that the new requirements of high-level officials for this year’s monetary policy have basically been achieved.
Looking at credit data, at the end of March, the balance of various RMB loans was 247.05 trillion yuan, a year-on-year increase of 9.6%, 0.5 percentage points lower than the previous month. This was mainly affected by factors such as a higher base in the same period last year and balanced credit allocation by financial institutions. The cumulative new loans in the first quarter were 9.46 trillion yuan, which was at a high level in the same period in history.
Overall, the total amount of loans has grown steadily and is distributed in a balanced manner. More importantly, attention should be paid to its direction and price.
In terms of prices, China News Service reporters learned from the People’s Bank of China that the weighted average interest rate of new corporate loans in March was 3.75%, 1 basis point lower than the previous month and 22 basis points lower than the same period last year; the interest rate of new personal housing loans was 3.71%, 15 basis points lower than last month and 46 basis points lower than the same period last year, both at historical lows.
Relevant data from major state-owned banks also show that, taking into account the relatively high interest rates in some areas of tight allocation, loan interest rates in key areas and weak links have actually fallen more.
In terms of investment direction, the above-mentioned major bank data also revealed that the year-on-year growth rate of manufacturing medium and long-term loans, inclusive small and micro loans, and green loans has generally remained at 20% to 30%, which is faster than the growth rate of all loans. Financial resources are good for “doing a good job” “Five Big Articles” and support to accelerate the development of new productive forces are taking effect at an accelerated pace. In addition, private enterprise loans continue to grow faster than all loans, and more than 90% of science and technology innovation companies currently receiving loan support are privately held companies.
Institutions generally believe that the past situation of real estate and financing platform companies occupying more financial resources will be changed, and the overall corporate financing environment will be significantly improved. Some research shows that the relationship between credit and economic growth has changed. It does not mean that more loans mean faster economic growth. The financing environment is moderately tight, the credit structure is optimized, and the pace is stable, which is more conducive to the high-quality development of the real economy.
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