Matters:
In March 2022, social finance increased by 4.65 trillion yuan, RMB loans increased by 3.13 trillion yuan, and M2 money supply increased by 9.7% year-on-year.
Ping An View:
The strong rebound of social finance in March is consistent with our judgment that "the prospect of broad credit is not bleak" last month. Considering the current severe epidemic situation in China and the increasing downward pressure on the economy, credit extension is still being stepped up. The stronger than expected social finance data in March was mainly due to: first, RMB credit soared by 3.23 trillion, with distinct characteristics of wide on balance sheet credit; Second, the repair of off balance sheet bills and trust loans led to a significant increase in off balance sheet financing over the same period last year. This is reflected in the increasing downward pressure on the economy, and the implementation of financial supervision may be loosened in stages; Third, government bonds were actively pre issued, driving a significant increase in direct financing over the same period last year.
The new RMB loans in March were stronger than those in the same period last year and even higher than the period when the monetary policy was vigorously launched in March 2020. Enterprises mainly "leverage" with short-term loans and bills. Medium and long-term loans recovered to a slight increase from February, which was significantly lower than the same period last year. The problem of weak loan demand has not been solved, and the year-on-year increase in short-term loans and bill financing of enterprises may be interpreted as the "impulse" of bank loans under the guidance of supervision. However, short-term loans and bill financing provide necessary liquidity for enterprises' production and operation activities. There is no doubt that they play a supporting role in the smooth operation of the real economy and are also a prerequisite for the gradual improvement of medium and long-term loans. The residents' demand for loans is still weak, the frequent epidemic, the lack of residents' willingness to buy houses and short-term consumption are the three problems that perplex the residents to "leverage".
In March, the year-on-year growth rate of M2 rebounded by 0.5 percentage points to 9.7%, and M1 was flat at 4.7% year-on-year. Considering that the tail raising factors of M1 and M2 fell significantly in March, it can be seen that the growth of money supply has accelerated under the strong total social finance. However, the year-on-year tail raising factor of M1 in March was 5.09%, which means that the new rising factor of M1 is still negative, the cash flow situation of the real economy is still poor, and there are still demands for the strength of macro policies. From the perspective of deposit structure, the finance may start to increase in March, and residents' consumption may still be limited at the subjective and objective levels.
Since April, the number of new asymptomatic infections in China has further accelerated, and China's epidemic prevention and control is facing another big test. It has formed a new suppression on economic growth from the aspects of consumption, travel and supply chain, which has brought new challenges to the annual growth target of about 5.5%. In this case, it is an inevitable choice for monetary policy to actively promote "wide credit". However, at the same time, under the influence of the continuing conflict between Russia and Ukraine and the Federal Reserve's interest rate hike and table contraction, China's inflation pressure has increased significantly from the perspectives of grain price, oil price and upstream price transmission, and the interest rate gap between China and the United States is close to upside down. This in turn has significantly constrained the further easing of monetary policy. We believe that the recent focus of monetary policy may be the expansion and increment of refinancing, the pressure drop of bank individual housing loan interest rate, and more emphasis on the implementation of fiscal policy and urban implementation of real estate. The possibility of reducing reserve requirements and interest rates has decreased. As for the policy attitude towards the economic growth target under the new situation and the corresponding adjustment, we still need to wait for the setting of the meeting of the Political Bureau of the CPC Central Committee at the end of the month.
