Central Bank Official to Media: Reasonably Interpret Current Financial Data Changes

On August 13, the People's Bank of China released the financial data for July.

Overall, the growth rate of financial data exceeded the nominal GDP growth rate, maintaining a reasonable overall growth. Looking at the scale of social financing, by the end of July, the scale of social financing increased by 8.2% year-on-year, still higher than the nominal economic growth rate. In terms of the effectiveness of interest rate cuts, in July, the People's Bank of China lowered the 7-day reverse repurchase operation rate, and both the 1-year and 5-year LPRs decreased by 0.1 percentage point, with new corporate loan interest rates remaining stable or decreasing.

In terms of credit structure, financial services supporting the "Five Major Tasks" continue to improve. By the end of July, the growth rates of medium and long-term loans for manufacturing, green loans, and inclusive small and micro loans were significantly higher than the overall loan growth rate.

Of course, some people are accustomed to the past high-speed growth and believe that this year's overall financial data growth rate is still slowing down. So, how should we view the current changes in financial data?

The author believes that as China's economy transitions from high-speed growth to high-quality development, monetary credit shifts from extensive expansion to intensive development, evaluating the quality and effectiveness of financial support for the real economy requires a diverse perspective.

Firstly, the new characteristics of financial data largely reflect the pains of the transition from old to new drivers.

As China's economic structural transformation and upgrading accelerate, traditional loan "heavyweights" such as real estate and local financing platforms that were highly dependent on credit funds are gradually adjusting. This adjustment may be reflected in credit data as no growth or even contraction. The demand for loans in new areas such as technological innovation, advanced manufacturing, and green development cannot fully replace the decline in traditional sector loans in the short term, leading to fluctuations in credit growth.

Secondly, financial institutions have increased efforts to revitalize existing resources and governance funds, significantly improving the quality and effectiveness of support for the real economy.

The efforts of financial institutions to revitalize existing resources and governance funds often do not manifest as an increase in loan balances. However, this year, financial institutions have actively revitalized existing loans, improved the efficiency of fund utilization, and recycled low-efficiency loans to new areas. Through "re-lending after shifting," the structure of existing loans has been significantly optimized.

As the effects of regulating manual interest supplementation and addressing fund idling continue to show, some enterprises find it difficult to sustain the past model of "increasing deposits and loans, low loans and high deposits, and virtual arbitrage," and have repaid loans in advance. New loans must first make up for the loans recovered and written off before growing, resulting in relatively less data on loan increments. However, the support to the economy is substantial.

Furthermore, the development of direct financing is accelerating, and the macro financing structure continues to improve.

In order to better adapt to the needs of China's economic structural transformation and upgrading to high-quality development, the financial system needs to pay attention to the relationship between the bond and credit markets, promote the establishment of a diversified financing system, accelerate the development of direct financing, and solidify support for the real economy through multiple channels.

With China's economic structural transformation and upgrading accelerating, and considering the already large scale of financial stock, this year, against the backdrop of weak effective credit demand, the steady growth rate of the social financing scale index, reflecting the real economy's financing support through various channels, demonstrates a certain resilience and also indicates a substitution effect between direct financing and bank credit Of course, as the economy gradually enters a virtuous cycle and the effects of previous policies gradually become apparent, it will drive the recovery and rise of effective demand. We look forward to the future economic policy focusing more on benefiting the people, promoting consumption, and expanding domestic demand with the aim of boosting consumption. As consumption recovers, the economic cycle will become smoother, creating new effective financing demands.

Author: Ma Meiruo, Source: Financial Times, Original Title: "Rationally Understanding the Current Changes in Financial Data"