In the financial data for September 2024, the characteristics of credit, social financing, and M1 were similar to those of the previous months. Although there was a marginal shift in policy at the end of September, the funds had not yet been implemented, especially with fiscal and other demand-side policies still uncertain. Corporate profits and entrepreneurs' investment confidence still needed to be restored, and there was a lack of credit vehicles, leading to a still weak overall credit allocation in September. However, the growth rate of M2 saw its first rebound since February 2023. By breaking down the deposit structure, in September, Renminbi deposits increased by about 1.5 trillion yuan year-on-year, of which non-bank deposits increased by 1.58 trillion yuan year-on-year, which was the largest contributing item. Generally, September is a big month for banks to rush deposits, and maturing wealth management tends to return to the books, usually reflected as residents' deposits. However, driven by a series of policies such as the 924 financial policy combination, the equity market started at the end of September. We believe that a large amount of wealth management funds turned to enter the equity market, coupled with a large influx of incremental funds from other channels. Due to the inclusion of securities companies' customer margin in non-bank deposits, non-bank deposits increased significantly in September. As a result, the subsequent evolution of the equity market will also have a significant impact on M2. In addition, if incremental fiscal policies are introduced at the end of October, we note that government bonds are a support in the issuance phase and a drag on M2, and have no impact on social financing in the disbursement phase but are a support for M2. Therefore, it is recommended to pay attention to the phased divergence between social financing and M2.
>>In September, new credit increased by 1.59 trillion yuan, still weak
In September, Renminbi loans increased by 1.59 trillion yuan, a year-on-year decrease of about 72 billion yuan, with a year-on-year growth rate of 8.1%, down from 8.5% previously. In the credit structure, only bill financing increased year-on-year, while other items all decreased year-on-year. Specifically, resident loans increased by 500 billion yuan, a year-on-year decrease of about 35.85 billion yuan, of which short-term and medium-to-long-term loans increased by 270 billion and 230 billion yuan, respectively, a year-on-year decrease of about 5.15 billion and 31.7 billion yuan, respectively.
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Corporate (institutional) unit loans increased by 1.49 trillion yuan, a year-on-year decrease of about 19.34 billion yuan, of which short-term and medium-to-long-term loans increased by 460 billion and 960 billion yuan, respectively, a year-on-year decrease of about 10.86 billion and 29.44 billion yuan, respectively, and bill financing increased by 68.6 billion yuan, a year-on-year increase of about 21.86 billion yuan. Although there was a marginal shift in policy at the end of September, the funds had not yet been implemented, especially with fiscal and other demand-side policies still uncertain. Corporate profits and entrepreneurs' investment confidence still needed to be restored, and there was a lack of credit vehicles, leading to a still weak overall credit allocation in September.
Non-bank loans decreased by 270.4 billion yuan, a year-on-year increase of 8.6 billion yuan. On the one hand, this is related to the mid-month liquidity tightening due to the maturity of MLF on the 15th but only being renewed in the latter half of the month. On the other hand, the alleviation of the deposit spillover effect led to the end of the abundant liquidity of non-bank "liquidity stratification".
>>In September, social financing increased by 3.76 trillion yuan, with government bonds as the core support item
In September, the social financing scale increased by 3.76 trillion yuan, a year-on-year decrease of about 36.92 billion yuan, with a month-end growth rate of 8%, down from 8.1% previously. In the incremental structure, government bonds were the core year-on-year positive contribution, increasing by 1.54 trillion yuan, a year-on-year increase of about 54.37 billion yuan. The issuance of government bonds accelerated, and the formation of subsequent practical work volume still depends on the effective disbursement and use of funds. Attention should be paid to whether there are incremental fiscal funds in the agenda of the Standing Committee of the National People's Congress at the end of October. If there are, it will continue to strengthen the support for social financing data.
Except for government bonds, other items all performed flatly. Renminbi loans under the social financing口径 increased by 1.97 trillion yuan, a year-on-year decrease of about 56.27 billion yuan; foreign currency loans decreased by 4.8 billion yuan, reflecting that domestic demand is still weak, but the low base last year achieved a year-on-year small decrease of about 1.03 billion yuan; entrusted loans increased by 3.92 billion yuan, a year-on-year small increase of about 1.84 billion yuan; trust loans increased by 600 million yuan, a year-on-year decrease of about 3.96 billion yuan; undiscussed bank acceptance bills increased by 13.12 billion yuan, although a year-on-year decrease of about 10.85 billion yuan, the off-balance-sheet bills unexpectedly recorded a positive increase, showing a certain degree of deviation from the real economy. We believe this may be due to the bill discount rate being too low, leading to some bill arbitrage behavior; corporate bonds decreased by 19.26 billion yuan, a year-on-year increase of about 25.76 billion yuan, possibly impacted by the rise in credit bond yields; equity financing increased by 1.28 billion yuan, a year-on-year decrease of about 1.98 billion yuan.
>>M2 growth rate rebounded, M1 growth rate continued to decline
At the end of September, the M2 growth rate was 6.8%, up from 6.3% previously, mainly affected by the significant increase in non-bank deposits. Specifically, in September, Renminbi deposits increased by 3.74 trillion yuan, a year-on-year increase of about 1.5 trillion yuan, of which resident deposits increased by 2.2 trillion yuan, non-financial enterprise deposits increased by 77 billion yuan, fiscal deposits decreased by 23.58 billion yuan, and non-bank deposits increased by 91 billion yuan. Resident and fiscal deposits decreased by about 33.16 billion yuan and 2.31 billion yuan year-on-year, respectively, while corporate and non-bank deposits increased by about 56.9 billion yuan and 1.58 trillion yuan year-on-year, respectively. Non-bank deposits were the largest positive contribution to the year-on-year increase in deposits. Generally, September is a big month for banks to rush deposits, and maturing wealth management tends to return to the books, usually reflected as residents' deposits. However, driven by a series of policies such as the 924 financial policy combination, the equity market started at the end of September. We believe that a large amount of wealth management funds turned to enter the equity market, coupled with a large influx of incremental funds from other channels. Due to the inclusion of securities companies' customer margin in non-bank deposits, non-bank deposits increased significantly in September. As a result, the subsequent evolution of the equity market will also have a significant impact on M2. In addition, if incremental fiscal policies are introduced at the end of October, we note that government bonds are a drag on M2 in the issuance phase and a support in the disbursement phase. Therefore, it is recommended to pay attention to the phased divergence between social financing and M2.The growth rate of M1 in September was -7.4%, compared to the previous value of -7.3%. M1 is primarily influenced by corporate demand deposits. Since July, the data has shown an unexpected downward trend. We believe the incremental logic lies in the fact that enterprises have been making up for past tax payments, leading to a significant reduction in demand deposits, and the increasing fiscal revenue and expenditure pressures have caused a decline in demand deposits of government agencies and organizations. The repair space for consumer spending and home purchases by residents is relatively limited, which also continues to suppress M1 data. The core focus for future data trends will be on consumer sentiment and the strength of fiscal support. In the short term, the intensity of consumer spending repair is greatly influenced by the sustainability of the wealth effect of this round. Additionally, compared to overseas, the statistical scope of China's M1 is actually narrower, with the most significant being that personal demand savings are not included in the M1 statistics.
At the end of September, the year-on-year growth rate of M0 was 11.5%, down from the previous 12.2%. The data is still relatively high. From the perspective of economic recovery, the economic improvement in third and fourth-tier cities and rural areas is slightly weaker, leading to increased demand for currency holding. Moreover, the return of migrant workers to their hometowns has also increased the circulation of cash.
>> Monetary policy is expected to still have room for easing
Regarding monetary policy, the policy combination at the end of September exceeded expectations. In addition to the 0.5% reserve requirement ratio cut and a significant interest rate cut (7-day reverse repo rate) of 20 basis points, the central bank may consider cutting the reserve requirement ratio by another 0.25-0.5 percentage points depending on the situation within the year. The unexpected cuts in reserve requirements and interest rates reflect a strong policy appeal for actively maintaining economic stability and reducing costs for the real economy. It is expected that the loan market报价利率 and deposit rates will also decrease by 20-25 basis points. Additionally, two structural monetary policy tools supporting the capital market may also increase in volume depending on the situation.
>> Risk warning
The implementation of domestic policies and their support effect on the fundamentals may be less than expected, which could disturb the RMB exchange rate and increase the difficulty of monetary policy decision-making.