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A few days ago, the People’s Bank of China’s website published three financial statistics reports for July: the first is the “Financial Statistics Report for July 2023”[1], and the second is the “Social Financing Scale for July 2023”. Incremental Statistical Data Report"[2], and the third is the "Statistical Data Report on the Scale of Social Financing in July 2023"[3].
According to data from the above-mentioned central bank public report, “the increase in social financing in July was 528.2 billion yuan, 270.3 billion yuan less than the same period last year.” Among them, “RMB loans issued to the real economy increased by 36.4 billion yuan, a decrease of 38.92 billion yuan year-on-year.” billion”. "RMB loans increased by 345.9 billion yuan in July, a decrease of 349.8 billion yuan year-on-year." Looking at the sectors, "household loans decreased by 200.7 billion yuan," "enterprise (institutional) loans increased by 237.8 billion yuan," and "non-banking financial services Institutional loans increased by 217 billion yuan." "RMB deposits decreased by 1.12 trillion yuan in July, an increase of 1.17 trillion yuan year-on-year."
Comparing the month-on-month growth with June, new social financing in June was 4.22 trillion (a year-on-year increase of 985.9 billion), and new RMB loans were 3.05 trillion (a year-on-year increase of 240 billion) [4]. Of course, the month-on-month comparison is a non-cyclical comparison and does not have much significance for cyclical data rather than trend data.
When this data came out, many people were surprised. Before the data was released, Securities Daily interviewed some analysts. Although they had some estimates for July as a small credit month at the beginning of the quarter, they also gave an increase in credit of 800 billion to 1 trillion, 900 billion to 12,300. Estimation of social financing increment of 100 million [5]. The actual data was only about half of the expected value. Social financing has plummeted, and both deposits and loans have fallen. Many people have begun to worry about the prospects of China's economic recovery. Some people even used Japan's lost 20 years as a lesson, saying that Japan failed to respond to the "balance sheet recession" immediately and turned the tide, resulting in bitter consequences.
Social finance data and credit data do not match exactly because they include other forms of financing (such as direct financing). In July, the increase in social financing minus the increase in loans was 182.3 billion; in the same period, there was a decrease in loans, a decrease of 349.8 billion, and a decrease in social financing of only 270.3 billion. Therefore, other forms of financing increased by 79.5 billion. If we assume that the increase of 79.5 billion is all direct financing, then this is actually good, because it not only matches the policy level’s consistent goal of encouraging more direct financing, but also shows that the economic structure is changing from more indirect financing (such as credit ) traditional industries are changing to emerging industries with more direct financing (such as equity financing).
In any case, the sharp decline in the growth rate of social financing reflects the disappearance of the acceleration of leverage, which is also in line with the recent intense deleveraging situation such as real estate explosion and trust explosion. If you have no money in your pocket but still have a strong desire to buy a car or open a cafe, it is mostly because you feel that the assets in your hands (such as real estate, trusts, financial management, stocks, Bitcoin, etc.) are quite substantial, and you are greedy. They sell their assets to support their desire to consume or invest ahead of time, so they borrow money. Now there is a sudden explosion, asset prices have shrunk, and they have even returned to the west (stopped cashing in). I originally had 10 million assets and borrowed hundreds of thousands of dollars, so I didn't feel panicky; now my assets have shrunk to 2 million. Do you still dare to borrow 500,000 or 1 million to buy a car or open a store? Then I definitely don’t dare to do it.
References:
- [1] http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5021127/index.html
- [2] http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5021118/index.html
- [3] http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/5021123/index.html
- [4] https://baijiahao.baidu.com/s?id=1771283779488635857
- [5] https://baijiahao.baidu.com/s?id=1773259542047177760
* * * Original work by Liu Jiaolian * * *
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