China Economy - Review of money supply in July Fine-tuning on the way in 2H
Event:
China's broad money supply, or M2, was up 16.35% yoy at 44.64 trln yuan at end-July; M1 rose 13.96% to 15.5 trln yuan at end-July from a year ago. Outstanding loans grew 15.46% to 30.88 trln yuan at end-July. Outstanding yuan loans were up 14.58% year-on-year at 29 trln yuan. In July alone, new yuan loans totaled 381.8 bln yuan, 150.4 bln more than July 2007; from Jan. to July, new yuan loans totaled 2834.3 bln yuan, 60.5 bln more than the same period last year. Outstanding yuan deposits were up 19.6 pct at 44.37 trln yuan. In July alone, new yuan deposits totaled 468.2 bln yuan, 309.7 bln more than July 2007; from Jan. to July, new yuan deposits totaled 5433.1 bln yuan, 1887.1 bln more than the same period last year.
Conclusion:
More new loans, reflecting fine-tuning of the monetary policy. In July alone, new yuan loans were 150.4 bln more than July 2007 and 63.3 bln more than June, 49.4 bln more than May this year; from Jan. to July, new yuan loans were 60.5 bln more than the same period last year. The faster increase of new loans is an advanced reflection of the policy fine-tuning. The central bank applies quarterly loan quota and thus most loans are lent at the beginning of a quarter. With new loans in 1H08 89.9 bln yuan less than that in 1H07 and the 5% hike of the total quota, the credit environment in 2H will be relatively loose.
Money supply growth continues to slow down and the scissors gap between M1 and M2 is narrowed. M2 supply growth rate at end-July is 0.39 pct points slower than that at 2007 yearend and 1.02 pct points slower than that at end-June. M1 supply growth rate at end-July is 7.09 pct points slower than that at 2007 yearend and 0.23 pct points slower than that at end-June. With money supply growth slowing down, monetary policy will enjoy greater room for relaxation. The scissors gap between M1 and M2 is narrowed, indicating inflow of savings deposit and more time deposit from enterprises. The main reason is inactive business activities and the stronger willingness of the residents to put money in the banks with the equity market in doldrums.
Less new residents' loans indicates the downturn of the real estate market. The new residents' loans totaled 49 bln yuan in July (11.5 bln yuan short-term and 37.5 bln yuan medium- and long-term), 61.3 bln yuan less than July 2007.
Fine-tuning of the monetary policy expected in 2H. The maximum interest rate hike is once with a low probability. Loan quota will be hiked with preference leaned towards some sectors. The room for RRR hike is limited. Yuan appreciation will visibly slow down.
China's broad money supply, or M2, was up 16.35% yoy at 44.64 trln yuan at end-July; M1 rose 13.96% to 15.5 trln yuan at end-July from a year ago. Outstanding loans grew 15.46% to 30.88 trln yuan at end-July. Outstanding yuan loans were up 14.58% year-on-year at 29 trln yuan. In July alone, new yuan loans totaled 381.8 bln yuan, 150.4 bln more than July 2007; from Jan. to July, new yuan loans totaled 2834.3 bln yuan, 60.5 bln more than the same period last year. Outstanding yuan deposits were up 19.6 pct at 44.37 trln yuan. In July alone, new yuan deposits totaled 468.2 bln yuan, 309.7 bln more than July 2007; from Jan. to July, new yuan deposits totaled 5433.1 bln yuan, 1887.1 bln more than the same period last year.
Conclusion:
More new loans, reflecting fine-tuning of the monetary policy. In July alone, new yuan loans were 150.4 bln more than July 2007 and 63.3 bln more than June, 49.4 bln more than May this year; from Jan. to July, new yuan loans were 60.5 bln more than the same period last year. The faster increase of new loans is an advanced reflection of the policy fine-tuning. The central bank applies quarterly loan quota and thus most loans are lent at the beginning of a quarter. With new loans in 1H08 89.9 bln yuan less than that in 1H07 and the 5% hike of the total quota, the credit environment in 2H will be relatively loose.
Money supply growth continues to slow down and the scissors gap between M1 and M2 is narrowed. M2 supply growth rate at end-July is 0.39 pct points slower than that at 2007 yearend and 1.02 pct points slower than that at end-June. M1 supply growth rate at end-July is 7.09 pct points slower than that at 2007 yearend and 0.23 pct points slower than that at end-June. With money supply growth slowing down, monetary policy will enjoy greater room for relaxation. The scissors gap between M1 and M2 is narrowed, indicating inflow of savings deposit and more time deposit from enterprises. The main reason is inactive business activities and the stronger willingness of the residents to put money in the banks with the equity market in doldrums.
Less new residents' loans indicates the downturn of the real estate market. The new residents' loans totaled 49 bln yuan in July (11.5 bln yuan short-term and 37.5 bln yuan medium- and long-term), 61.3 bln yuan less than July 2007.
Fine-tuning of the monetary policy expected in 2H. The maximum interest rate hike is once with a low probability. Loan quota will be hiked with preference leaned towards some sectors. The room for RRR hike is limited. Yuan appreciation will visibly slow down.
No comments:
Post a Comment