[February 15, 2023]The Central Bank of the Communist Party of China has just released financial statistics and social financing data for January. The mainland media have reported that credit in January is off to a good start, but is this really the case? We know that residential financing needs have been sluggish since at least last year,Resident depositsHowever, it is increasing significantly, so this is in line with the recent interesting advanceLoan Tide, does it matter? New residents in China last year and this year”excess savings“, and can it be transformed into consumption and greatly stimulate economic growth? Let’s talk about these contents today.
Residential financing continues to slump”Loan Tide“Why?
On February 10, data released by the People’s Bank of China showed that RMB loans increased by 4.9 trillion yuan in January, a record high in a single month since 2010; social financing in January was 5.98 trillion yuan, a year-on-year decrease of 195.9 billion yuan, but , the absolute scale hit the second highest record in history.
At first glance, the total social financing and credit data “lived up to expectations” and exceeded expectations. But thinking about it carefully, there are still many problems.
For example, credit issuance in January hit a record high, but corporate bonds and government bonds increased by 435.2 billion yuan and 188.6 billion yuan respectively year-on-year, indicating that bond financing has dragged down the overall situation. And on the whole, the year-on-year growth rate of social financing stocks in January continued to fall from 9.6% in the previous month to 9.4%, showing that the fundamentals are still in the pattern of “strong expectations and weak recovery”.
In addition, from the perspective of credit structure, the obvious differentiation between residents and corporate financing is still continuing.
Specifically, of the 4.9 trillion yuan of new RMB credit in January, 4.68 trillion yuan was new loans to the corporate sector, significantly exceeding the performance of the same period in history. The analysis generally believes that the substantial increase in corporate credit is mainly due to the promotion of active policies in infrastructure and other aspects, and the strong motivation of banks to charge loans at the beginning of the year, which jointly drove the performance of corporate loans.
At the same time, in January, the increase in resident credit was 257.2 billion yuan, a new low since 2013, mainly due to the drag of residents’ medium and long-term loans. Residential mortgage loans increased by 519.3 billion yuan year-on-year, continuing the trend of declining resident loans last year.
According to the data released earlier by the central bank, the medium- and long-term loans and short-term loans of residents in 2022 will decrease by 3.33 trillion yuan and 760 billion yuan respectively year-on-year. The increase in medium and long-term loans to households was the lowest level since 2015.
According to Haitong Macro estimates, since 2018, the growth rate of loans to Chinese residents has gradually dropped from more than 20% at the peak to 5.4%. In terms of scale, the scale of residential loans every three months after seasonal adjustment, At the highest point, it reached close to 2.6 trillion yuan, but now it has dropped to less than 800 billion yuan, basically returning to the state of ten years ago.
So, why do residents’ loans continue to decrease?
The reason, in addition to weak real estate sales, “early loan repayment” is also an important factor. The reason for the “loan repayment wave” is that the interest rate on residents’ assets and liabilities has been significantly inverted.
On the one hand, the rate of return on residents’ assets is constantly falling.
It can be known from public information that more than 60% of the asset allocation of Chinese residents is in real estate assets. However, in the past few years, real estate yields have gradually declined, and even losses. Moreover, there are relatively high costs of holding real estate, including tax costs, maintenance and depreciation costs, property fees, etc.
On the other hand, on the debt side of residents, the mortgage interest rate has been significantly higher than the market-oriented level.
According to Haitong Macro estimates, as of the end of the third quarter of 2022, the interest rate of new mortgages is still at 4.34%, while the interest rates of market-oriented mortgage loans and operating loans are already approaching 3%. The mortgage interest rate of stock housing is higher, which is 1 to 2 percentage points higher than the market interest rate on average.
Since the return on assets of residents is no longer sufficient to cover the mortgage interest rate, there has been a wave of early repayment of loans.
Resident depositsWhere will the substantial increase in money come from?
In addition, another data reported by the central bank is also worthy of attention, that is: RMB deposits increased by 6.87 trillion yuan in January, an increase of 3.05 trillion yuan year-on-year. Among them, household deposits increased by 6.2 trillion yuan, while non-financial corporate deposits decreased by 715.5 billion yuan. Since the epidemic, the growth momentum of residents’ deposits has continued unabated, that is to say, people love to save money again.
In fact, since December last year, the so-called “excess savings“Whether it can become a catalyst to stimulate consumption has become the focus of discussion among Chinese and foreign securities firms.
Because official data show that for the whole year of 2022, RMB deposits will increase by 26.26 trillion yuan, an increase of 6.59 trillion yuan year-on-year. Among them, household deposits increased by 17.84 trillion yuan.
Moreover, the new resident deposits in 2022 will set a historical record. The new resident deposits in 2019, 2020, and 2021 are 9.7 trillion yuan, 11.3 trillion yuan, and 9.9 trillion yuan, respectively.
In other words, the new resident deposits in 2022 will increase by 7.94 trillion yuan more than in 2021 and 8.14 trillion yuan more than in 2019.
So, what is the reason that led to a substantial increase in residents’ deposits?
First of all, under the influence of the epidemic and industry regulation, residents’ income has declined, and they expect future income to be unstable, so they reduce expenditure, leading to an increase in “precautionary savings”.
Guotai Junan previously estimated that in the past three years, due to the reduction in consumption caused by epidemic prevention measures and supply shocks, the total amount of precautionary savings has accumulated about 4.2 trillion yuan.
Second, due to the continuous downturn in the real estate industry and the impact of the guaranteed delivery incident, residents’ willingness to buy houses has declined, and the expenditure on house purchases has decreased. This part of the funds has also been converted into savings. According to data from the Statistics Bureau of the Communist Party of China, the sales of commercial housing in China in 2022 will be nearly 5 trillion yuan less than in 2021.
The third is that the rate of return on residents’ financial assets has fallen, or even lost money, so they would rather save their money than invest in financial management.
In 2022, China’s new asset management regulations were officially implemented, and rigid redemption was broken. Many bank wealth management products experienced relatively large fluctuations in net value, and even fell below the net value, leading to a “redemption wave” of wealth management products.
According to statistics from China Merchants Securities, from November to December last year, the bond market continued to adjust, superimposed on the decline in the stock market, and the net loss rate of wealth management products increased significantly. On December 20, it hit a record high, with the net loss rate reaching 22.7%. According to estimates by China Merchants Securities, since November 10, 2022, the scale of bank wealth management has dropped by more than 4 trillion yuan.
Although more than two months have passed since the bond market turmoil that started in November last year, the “pain” of investment losses still hangs over investors’ hearts. This has also led to a sharp increase in deposits as investors have reduced risk appetite and are more inclined to obtain stable returns.
Therefore, the substantial increase in deposits is how it came about.
Can 8 trillion “excess savings” stimulate consumption?
However, some so-called “experts” on the platform of the CCP have been eyeing the 8 trillion additional residents’ deposits last year. They have been thinking about how to convert this part of “excess savings” into consumption, thereby greatly stimulating economic growth. .
For example, on January 24, a professor of economics at Sichuan Agricultural University issued an article saying that it is recommended to levy high interest taxes on deposits of more than 500,000 yuan, saying that this is the best way to promote and stimulate consumption. Verbal criticism from netizens.
In Fenghuang.com’s financial column, Deng Haiqing, deputy general manager and chief investment officer of AVIC Fund, expressed his opposition to the collection of deposit interest tax.
Deng Haiqing said that in fact, the interest on deposits in the bank is very small, and most of the interest is invested by some elderly people. Because the elderly lack investment ability and some understanding of new things, they can only adopt such a very extreme and conservative financial management method. If the old people’s fixed deposit interest is used to tax, it is actually taking advantage of the vulnerable groups, which is very undesirable.
So, can these “excess savings” significantly boost consumption this year? Many experts hold a negative view.
For example, Shen Jianguang, chief economist of Jingdong Group, said: First of all, it is the real estate industry that plays a decisive role in boosting consumption, and real estate consumption is still weak. Secondly, the savings brought about by the redemption of financial assets such as wealth management are not intended to be used for consumption, and even if they are released later, they will flow to the capital market. Only by enhancing consumer confidence can more income be spent on consumption.
Chen Zhiwu, a professor at the School of Economics and Management of the University of Hong Kong, also said that in the past year, the confidence of Chinese individuals and enterprises has dropped sharply. He believes that when people feel uncertain about the future, their first reaction is to save money.
Data show that since April 2022,Chinese consumptionIn November last year, the consumer confidence index was only 85.5, while in July 2021, the mainland consumer confidence index was still 107.5; since last year, this consumer confidence index has even broken through 2000 lowest point ever.
Liu Yuanchun, president of Shanghai University of Finance and Economics, said that precautionary savings are precautionary, and it is not appropriate to place too much hope on residents to quickly convert prudent savings into consumption funds.
Experts also said that the focus of boosting residents’ consumption is on housing and automobiles and other major consumption items.
But at present, the real estate market is still relatively sluggish, and market confidence and expectations are sluggish.
According to the report of China Finger Research Institute and CRIC, in January this year, the overall sales amount of China’s top 100 real estate companies was about 354.29 billion yuan, a year-on-year decrease of 32.5%. In addition, in January this year, the overall transaction volume in first-tier cities decreased by 29.5% year-on-year, of which Shenzhen performed the worst, with a year-on-year decrease of 60%.
In addition, according to data released by the China Passenger Federation, the retail sales of China’s passenger car market in January reached 1.293 million units, a year-on-year decrease of 37.9% and a month-on-month decrease of 40.4%. The situation of fuel vehicles is even worse, with sales falling by 45.1% year-on-year, nearly cut in half.
The “First Financial Chief Economist Confidence Index” released in January this year also showed that economists’ confidence index for the Chinese economy in January this year was only 49.86, still below the line of prosperity and decline.
Liu Ligang, head of Asia-Pacific economic analysis at Citi Global Wealth Investments, believes that the generation of Chinese who have recovered from the epidemic may have similarities with the generation of Americans who emerged from the Great Depression, and their willingness to save may will change for a long time.
Dong Ximiao, chief researcher of China Merchants Union Finance, believes that in the long run, the increase in savings is also related to the social security system. In recent years, China’s education, medical care, pension and other system reforms have been vigorously reformed. When the social security system is difficult to fully cover, residents’ awareness of prevention and willingness to save have also increased significantly.
As you all know, recently, in Wuhan, retirees took to the streets to protest against the reduction of medical insurance. It is conceivable that the Chinese people’s willingness to save in the future will only become stronger and will not be weakened.
As the “Wall Street Journal” reported on February 10, after lifting strict epidemic prevention restrictions, the Chinese government is trying to promote economic growth, but it is currently facing a challenge: the Chinese people reduced their debts last year and increased their income. Without saving, it is not clear how long it will be before they can spend as much as they want again.
Institute of Finance, Commerce and Economics
Planning: Yu Wenming
Written by: Li Songyun
Editors: Wei Ran, Yu Wenming
Producer: Chen Siyu
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