Credit, social finance and M2 fell in July, and financing demand cooled significantly.

Date: 2021-08-12
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Financial data released by the central bank on Wednesday showed credit, social finance and broad money supply (M2) fell across the board in July. Market participants noted that financing demand cooled significantly in July and that the credit contraction was not over but nearing an end. Data showed that the total amount of social financing increased by 1.06 trillion yuan in July, 636.2 billion yuan less than the same period last year. Yuan-denominated loans rose 1.08 trillion yuan in July, up 90.5 billion yuan from a year earlier. The balance of broad money supply (M2) was 230.22 trillion yuan, up 8.3% year on year. According to the recent C50 wind Index survey by The Financial Association, market institutions forecast a median of 1.1 trillion yuan in new yuan loans, 1.8 trillion yuan in social financing, and 8.8% in broad money (M2) growth. Zhao Wei, chief economist of Open source Securities, said that the impact of real estate regulation and debt regulation is accelerating, adding the financing contraction brought by weak demand, or further strengthen the credit 'contraction'. Social finance, purchasing managers' index (PMI) and other indicators show a clear downward trend in the economy, and it is difficult to reverse the credit contraction and economic trend with the post-fiscal adjustment. Wang Qing, chief macro analyst at Jincheng, told THE Financial Association that the boost effect of the central bank's RRR cut on credit and social finance will be reflected in August, and it is expected that the financial data in August are expected to pick up comprehensively. The 'tight credit' process since the beginning of the year is coming to an end, and the financial data in July are at the bottom of this round of 'tight credit' process. Data showed that the stock of social financing at the end of July was 302.49 trillion yuan, up 10.7% year on year. From the perspective of structure, the balance of RMB loans to the real economy at the end of July accounted for 61.3% of the total social financing scale in the same period, 1 percentage point higher than the same period last year. The macro team at Soochow Securities (8.310, -0.05, -0.60%) pointed out that in addition to the lack of government financing, the contraction in off-balance-sheet financing reflects the dual pressures of tighter regulation and a slowing economy. In terms of off-balance sheet financing, trusts and undiscounted bills of exchange decreased significantly, which once again reflected the pressure of real estate and local implicit debt supervision, resulting in insufficient financing demand of the real economy. Wen Bin, chief researcher of Minsheng Bank, pointed out that the stock of social finance increased by 10.7% this month, down 0.3 percentage points from the previous month, which is the lowest since the outbreak of the epidemic last year. New social financing was lower than expected, mainly due to a drop in non-standard pressure and slower issuance of government bonds. WenBin said at the same time, social harmony is bottoming process, social harmony back embodies the trend of governance off-balance-sheet financing, the obvious weak government bond financing, is expected to promote government bonds to speed up the issue, to social harmony form to support growth, but gradually higher base club melting last year, also means that the next phase probability of melting rates remain low volatility. The data also showed that household loans increased by 405.9 billion yuan in July, with short-term loans increasing by 8.5 billion yuan and medium - and long-term loans increasing by 397.4 billion yuan. Corporate loans increased by 433.4 billion yuan, of which short-term loans decreased by 257.7 billion yuan, medium - and long-term loans increased by 493.7 billion yuan, and bill financing increased by 177.1 billion yuan. Loans to non-banking financial institutions increased by 177.4 billion yuan. Wang Hao, a senior researcher at The Zhi Xin Investment Research Institute, pointed out that short-term credit and bills in the corporate sector declined significantly in July, while medium - and long-term loans maintained steady growth. Both short - and medium - to long-term credit to the residential sector declined sharply, with the former mainly due to seasonal factors and the latter closely related to the recent strict property control policies. Soochow securities macro team that medium - and long-term loans cooling, short - term loans over seasonal decline. Under the dual pressure of strengthened supervision of real estate and local implicit debt, medium - and long-term loans to residents and enterprises have cooled. In addition, the larger than expected contraction of short loans was also an important drag on credit in July. Considering the changes in M1 growth and deposits, the operating pressure of enterprises increased significantly, and the recovery of residents' willingness to consume was blocked due to repeated outbreaks. The data showed that the balance of M2 at the end of July was 230.22 trillion yuan, up 8.3% year on year. The growth rate was 0.3 percentage points lower than the end of last month and 2.4 percentage points lower than the same period of last year. The balance of narrow money (M1) was 62.04 trillion yuan, up 4.9% year on year, 0.6 percentage points slower than the end of last month and 2 percentage points slower than the same period last year. The balance of money in circulation (M0) was 8.47 trillion yuan, up 6.1% year on year. Net cash injection of 37.1 billion yuan in the month. Mr Zhao said the sharp slowdown in both M1 and M2 growth also reflected a sharp contraction in bank derivatives. M1 fell 0.6 percentage points to an 18-month low of 4.9 per cent in July, while M2 fell 0.3 percentage points to 8.3 per cent. M1 fall is related to the year-on-year decrease in demand deposits of enterprises; M2 fall directly due to resident deposits, non-bank deposits sharply contraction. Huatai Securities (14.840, 0.01, 0.07%) fixed income Zhang Jiqiang team pointed out that the deposit in July super seasonal decline, in addition to factors such as loan derivative, there may also be the impact of deposit point after the reform of interest rate reduction. In addition, at the end of the quarter, banks have a demand for deposits, and a large number of financial resources are converted into general deposits, which will return to financial management after cross-quarter, which will also bring about changes in the deposit structure between residents and non-banks. Wen bin also pointed out that compared with the M2 and new yuan loans this month, the credit derivation ability is not outstanding. July is the traditional big tax month, which is equivalent to the strengthening of money withdrawal, leading to the M2 growth rate to fall.

(Credit: Ap)

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