On October 14th, the People's Bank of China released the latest financial data. In the first three quarters, the total increase in social financing scale reached 25.66 trillion yuan, 3.68 trillion yuan less than the same period last year. By the end of September, the stock of social financing scale was 402.19 trillion yuan, a year-on-year increase of 8%.

According to the analysis by Yicai, there are several key points in the latest financial data worth noting.

Firstly, the growth rate of M2 rebounded, while the growth rate of M1 continued to decline. By the end of September 2024, the balance of broad money (M2) was 309.48 trillion yuan, a year-on-year increase of 6.8%, 0.5 percentage points higher than the end of the previous month. The balance of narrow money (M1) was 62.82 trillion yuan, a year-on-year decrease of 7.4%.

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Secondly, the growth of social financing scale was stable. By the end of September, the stock of social financing scale was 402.19 trillion yuan, a year-on-year increase of 8.0%, which is basically in line with the expected targets for economic growth and price levels. From January to September, the increase in social financing scale was 25.66 trillion yuan.

Thirdly, the growth of loans was basically stable. By the end of September, the balance of all RMB loans was 253.61 trillion yuan, a year-on-year increase of 8.1%. From January to September, the increase in all loans was 16.02 trillion yuan.

Rebound in M2 growth rate

Some funds accelerated the return from wealth management products and other asset management products, driving the rebound of M2.

The central bank's data shows that by the end of September, the balance of broad money (M2) was 309.48 trillion yuan, a year-on-year increase of 6.8%. The balance of narrow money (M1) was 62.82 trillion yuan, a year-on-year decrease of 7.4%. The balance of money in circulation (M0) was 12.18 trillion yuan, a year-on-year increase of 11.5%. In the first three quarters, the net cash injection was 838.6 billion yuan.

Among them, the rebound in the growth rate of M2 was 0.5 percentage points higher than the end of the previous month. 2023 was the first year after the stable transition of the epidemic, and the growth rate of M2 obviously accelerated, leading to a higher base. Looking at the average growth rate of M2 at the end of September 2023 and 2024, excluding the base effect, the average growth rate was 8.5%, maintaining a reasonable and sufficient liquidity.

Market experts believe that the rebound in the growth rate of M2 is the result of the joint action of multiple factors. The recent introduction and implementation of a package of incremental policies have provided obvious support for the recovery of market confidence, especially the return of wealth management funds, which has supported the growth of the total amount of money. The market generally reflects that the effects of incremental policies will further emerge, and the total amount of finance is expected to maintain a stable growth in the future.From the perspective of M2 composition, M2 not only includes cash and demand deposits but also encompasses a wider range of monetary instruments. It primarily consists of cash in circulation, bank demand deposits, time deposits, savings deposits, and securities firms' customer margin funds (margin funds collected by securities firms).

Following the release of a package of incremental policy measures, the market has warmly responded to the two tools aimed at supporting the stable development of the stock market. Market expectations have improved, and the stock market has recently rebounded. Some funds have accelerated their return from wealth management and other asset management products, and the inclusion of securities customer margin funds in M2 has also driven the rebound of M2.

Social financing scale and loan growth rate slightly decline

A high base last year is an important factor affecting the changes in social financing scale and loan growth rate in September this year.

Looking at the social financing scale, preliminary statistics show that by the end of September 2024, the stock of social financing was 4,021.9 trillion yuan, a year-on-year increase of 8%. The cumulative increase in social financing scale in the first three quarters was 25.66 trillion yuan, 3.68 trillion yuan less than the same period last year.

Regarding RMB loans, in the first three quarters, RMB loans increased by 16.02 trillion yuan (compared to 19.75 trillion yuan last year), of which, by the end of September, the outstanding balance of RMB loans was 2,536.1 trillion yuan, a year-on-year increase of 8.1% (compared to a year-on-year increase of 10.9% last year).

Market experts analyze that last year's financial industry value-added calculation method was mainly based on the estimated growth rate of deposits and loans. Some local governments, in order to promote regional economic growth, supervised financial institutions to increase loan disbursements, leading to a high loan base. With the optimization and adjustment of the financial industry value-added calculation method, this phenomenon has significantly reduced this year.

Some industry insiders also reflected that with the implementation of the existing housing loan interest rate adjustment policy in September last year, the phenomenon of early loan repayments decreased. Some banks also brought back loans involved in the residential mortgage-backed securities (RMBS) issued earlier, which to some extent pushed up the loans at that time. This year, the overall effective financing demand is generally weaker than last year. After the impact of last year's high base, the social financing scale and loan growth rate in September have slightly declined. After excluding the high base factor, the growth rate is generally stable, and the financial support for the real economy is also more stable and substantial.

Policy adjustments focus on real estate and capital markets

Since September, a series of incremental policies have been announced and implemented, and the positive reactions they have brought to the market are still ongoing."Regardless of looking at the policy mix or individual policies, the recent central bank policies have been very strong," said a leading market expert. This round of policy adjustments has targeted two key points: the real estate market and the capital market.

The market generally believes that the adjustment in the real estate market this time has lasted longer than in the past, with market confidence remaining weak, affecting the operation of the economy. Looking at this year's monetary policy operations, the central bank has focused on promoting consensus among all parties and grasping the key point of the real estate market. In May, it optimized housing credit policies, established a re-lending facility for affordable housing, and promoted the de-stocking of existing commercial housing. In September, it further reduced the interest rates on existing mortgages and the minimum down payment ratio for mortgages, and extended the implementation period of some real estate financial policies. The effects of earlier policies are gradually becoming apparent, and the real estate market has already shown a positive response.

The stock market is a barometer of the macroeconomy and a concentrated expression of market confidence. Recently, the central bank has also created two structural tools to support the stable development of the stock market.

Industry experts have said that after a series of policies were introduced, the stock index has rebounded, effectively boosting market confidence.

However, there are also different voices in the market regarding structural policies. For example, some argue that while funds have flowed into the market, they have not flowed into the real economy.

"The central bank is concerned about structural blockages. If these structural blockages are not handled well, they will also have a significant impact on confidence. Recently, some of the policies introduced by the central bank are structural and aimed at addressing these blockages, with the core still being the real economy," said the aforementioned leading expert.

In recent years, the financial sector has introduced various structural policy measures to advance structural reforms in the financial supply side and optimize financial services.

Industry experts believe that structural policies are ultimately intended to serve the real economy, addressing key blockages in its operation. Some policy tools will also promote the smooth circulation of the real economy by reversing the downward spiral feedback in specific markets.

In recent years, as China's economic structure has been transforming and upgrading, credit structures have also been adjusted accordingly. The overall demand for credit in traditional areas such as real estate and local financing platforms has contracted, while new drivers such as green development and technological innovation have been accelerating. Although it is difficult to fill the gap in credit growth in the short term, efforts are being made to catch up.

The journalist learned from the central bank that by the end of September, the balance of medium and long-term loans in the manufacturing industry was 13.88 trillion yuan, a year-on-year increase of 14.8%, of which the balance of medium and long-term loans in high-tech manufacturing increased by 12.0% year-on-year; the balance of loans to "specialized, refined, and innovative" enterprises was 4.26 trillion yuan, a year-on-year increase of 13.5%; the balance of inclusive small and micro loans was 32.90 trillion yuan, a year-on-year increase of 14.5%. The growth rates of the above loans are all higher than the growth rate of all loans during the same period.