To talk about this issue, we must first figure out how funds flow into the market? And what is funds idle?
We all know that since December last year, the central bank has begun to frequently cut reserve requirements and interest rates.
Every time after the data is released, everyone gets excited and all kinds of beeping noises come out.
For example, they say that the property market is going to rebound, the stock market is going to take off, and the era of floods in 2022 is coming...
Don't listen to them. Beep.
It’s dark and the roads are slippery, so drive carefully!
In the modern credit economic environment, the complete process of releasing water is as follows:
The central government releases water to the financial system through monetary instruments such as MLF, and the financial system releases water to the market through credit , companies and individuals in the market invest or consume money, and the entire market economy chain comes alive.
Idle funds refer to the fact that the water released by the central government to the financial system flows between banks and cannot go to the market, causing the economic effects of the funds to be unable to appear. Regarding this phenomenon, I have a detailed explanation in an article. You can click to read it: Why does the central bank still feel that there is no money in the market and money is tight even though the central bank has released water?
In December 2021, the central bank began to frequently cut reserve requirement ratios and interest rates, and leaders also frequently released rumors at various high-level press conferences, pointing to the easing monetary environment.
The situation at that time was as follows:
Let’s look at the new loan data first. In December, RMB loans increased by 1.13 trillion yuan, weaker than the expected 1.24 trillion yuan, a decrease of 130 billion yuan year-on-year, and lower than the previous value of 1.27 trillion yuan.
Looking at the money supply M2, the year-on-year growth was 9, which was better than the expected 8.7, and the previous value was 8.5.
The increase in money supply corresponds to the increase in currency released by the central bank's RRR and interest rate cuts.
The reduction in loan scale corresponds to the fact that commercial banks have not released money into the market.
This means: In December 2021, the money released by the central bank’s RRR cuts, interest rate cuts, and various easing measures did not enter the entity, consumption, and asset fields, but were used within financial institutions as Very low cost idling.
Then the question arises. The 4 trillion in 2022 is the data provided by the national credibility background. It is the actual amount of currency flowing into the market. Why is it said that the funds have been idle in another form?
There is no need to question the relevant data given by the country's credibility authority, and China's financial market has always been about getting off to a good start. This result must be satisfactory to the top management, and it is indeed a good sign.
What we want to discuss in detail is the internal structure of credit scale, that is, which specific indicators have increased? Which indicators have dropped, so that we can see the actual state of the economy and the true response of currency flows.
The financial data for the first month of 2022 has been released. Let’s take a look at some specific key data:
From a total perspective, it can indeed be said that it is off to a good start and exceeds expectations. .
The increase in social financing reached a new high, and the growth rate of M2 exceeded expectations... It is easy to directly think of a conclusion
- water is coming, there is more money, and the situation is great .
When most people focus on "M2 growth rate reached 9.8, far exceeding expectations", they ignore the following set of data
- In January, M1 The growth rate is "-1.9".
China’s M1 recorded negative growth for the first time in history.
M1 refers to current cash, and M2 refers to M1 plus time deposits or fixed-term financial management. The two are inconsistent, which proves that current cash is transforming into deposit deposits.
M1 negative growth, simply put, means: consumption willingness is declining, investment willingness continues to be sluggish, and economic activity is still very low.
M1 reflects purchasing power in real life.
If it is high, it means that people have plenty of money and are willing to spend money, companies are willing to invest, have high expectations for future investment, and have good capital liquidity.
If it is low, it means that people are short of money and have little desire to spend money, companies are not optimistic about future earnings and are unwilling to invest, and there is a lack of liquidity in the real economy.
The increase in M2 only shows that the central bank has indeed given more money to the banks.
The increase in the total amount of credit also shows that banks have indeed released the money given by the central government into the market through credit.
However, whether the market gets the money or not spends it is another matter.
The fact that MI deviates from M2 just illustrates: the market got the money, but did not spend it. Instead, it was changed hands and deposited in banks by people, and returned to financial institutions again.
Just like during the Chinese New Year, elders among relatives give new year's money to their children. After the children get the money, they don't use it to buy things, but change hands and give it to their parents.
So, why? Why take out a loan and then transfer it to deposit?
Of course, it’s because I feel that making money by investing is unreliable, so it’s better to eat the interest rate difference!
In the final analysis, I still have no confidence. The market is very pessimistic about investment expectations!
After the central government lowered the cost of funds for banks, the interest rates on bank loans have also dropped, and the cost of using funds has dropped. In addition, in order to complete their tasks, banks began to introduce various interest-free/low-interest loan products to the market. Under this situation, some institutions took advantage of the situation and started the credit transfer arbitrage model.
For example, CITIC Securities immediately started allotment of funds after the central bank lowered reserve requirements and interest rates. As a result, after receiving the money, it took 8 billion to Huaxia Bank for a fixed deposit, and the securities firms had to earn interest on it. Isn’t it delicious to lie down like this?
Money has gone around in a circle and is still idling in the financial system. The difference is that unlike last December, the market took part in the idling of funds.
After all, funds have circulated in the market. Have they had any effect on the real economy, corporate investment and personal consumption?
Of course it’s useless!
Don’t believe it? Let’s take a look at the breakdown of new RMB loans:
In January, the total scale of RMB loans increased by 394.4 billion, while medium and long-term loans to the corporate sector only increased by 60 billion, short-term loans to residents and medium- and long-term loans But they are all reduced.
Residents’ short-term loans correspond to living consumption, which has decreased again, indicating that the consumer side is not good;
Residents’ medium and long-term loans correspond to housing loans, which are also shrinking, indicating that the property market It is unlikely that there will be an Indian Summer;
Both of these are decreasing. Should those voices that start shouting for a rebound in the property market and rising prices when they see 4 trillion yuan stop? A slap in the face or not?
It’s just that the amount of money doesn’t match up in this data. Where did the rest of the money go? Where does the released water go?
Corporate short-term loans and corporate notes, of course!
Among them, short-term corporate loans hit a record high!
As we all know, short-term corporate loans are loans within one year, with low interest rates, fast disbursement, and simple operation.
Short-term loans have increased significantly, while medium- and long-term loans have shrunk.
What does this mean?
Banks are using short-term loans to offset quotas, and some institutions in the market have cooperated with banks to create a good start!
Looking at the so-called growth in credit scale, if you look at it in detail, the data does not reflect the real market demand, let alone bring about growth in economic benefits, but artificially pulls up loan indicators and actively promotes The purpose of high credit scale is to make the data look good!
Ridiculous, right?
In December 2021, senior central bank officials proposed the credit task of “taking the initiative, supporting entities, and taking forward monetary policy.” His words are sincere and his attitude is unprecedented. The financial system is also under credit pressure and needs to send positive signals to the market to boost market information and investment expectations.
As a result, all major commercial banks are rushing to meet the credit tasks proposed by senior leaders by issuing a large number of "short-term loans." One after another, they found some cooperative units with good credit and good economic benefits. They took out low-interest loans to complete the task, and then transferred the money and deposited it in the bank to earn interest. Once the task was completed, no one lost money. As soon as the data came up, the central bank and financial institutions The system looks better, and the relationship between banks and enterprises is getting closer...
This bank has had a good start, and the bank has really worked hard, taking the initiative, actively lending, and is busy non-stop.
In the real economic environment, wealthy companies play the game of short-term borrowing and transfer, while companies that are really short of money still cannot get money because of high risk indicators, and they still cannot produce well. There is still no fundamental solution to operating, expanding scale, and increasing employment...
But there is nothing we can do about it, right? The chilling effect of China's domestic economic environment and market will suddenly disappear.
Think about the bank’s credit opening. Why is it difficult to lend money? Not only are companies affected by the epidemic afraid to lend money, but banks are also afraid of risks when lending. Nowadays, credit is a lifetime responsibility system. Banks The person in charge must not only complete the tasks but also avoid bad debts.
Under this kind of thinking, instead of taking big risks and lending money to entities that really need it, it is better to lend it to peers or play a short-term loan-for-deposit game with companies that don’t need the money.
Some people conclude that the central bank has spent so much effort, from monetary easing (the central bank releases water to banks) to credit easing (banks release water to the market), and has been unable to truly make effective efforts. The fundamental reason is not that the market does not dare to Investment, don’t people dare to consume?
Aren’t they worried that the loan interest is too high and they are afraid they won’t be able to pay it back?
Then just keep the interest rate going down, or just go straight to 0!
Who would say no to free money?
Moreover, aren’t developed countries all with low interest rates? Some even have negative interest rates. This is to prevent people from lying flat and saving money instead of investing. China will have to take this step sooner or later. , why not cut the reserve requirement ratio and interest rates several times across the board?
Is this useful?
Of course it’s useless, and it’s very risky!
First of all, China's current domestic economic environment is already facing great debt risks and is no longer suitable for increasing leverage. For details, you can read my article: What kind of debt crisis is China facing now?
Under the influence of the epidemic, the real economy does not dare to borrow money. Even if credit is reduced to the minimum, no industry dares to borrow money. What's more, the real estate industry, the original pillar industry, has been clearing and shrinking its balance sheet. Even if they dare to borrow, the country will never allow funds to flow into the property market again.
Why?
Because it is unrealistic and unrealistic, we cannot continue! This will have a greater impact on the real economy. The purpose of the state's release of water is to support the economy, but also to develop industry and achieve common prosperity for all.
The real estate industry has long been a financial attribute. It needs to be transformed into a real real economy and realize its true residential attribute.
Furthermore, if funds are allowed to flow further into real estate and the wealth of those who own more real estate continues to grow, it will be tantamount to increasing the gap between rich and poor, which is completely contrary to the original intention of national regulation.
Moreover, China’s household sector leverage ratio has reached as high as 72.2 in 2021, which is already higher than the international average level. Will it continue to increase leverage for residents? Isn't this noisy?
Think back to when Japan’s real estate bubble crisis broke out, how many families were dragged into the abyss by debt. Increasing residents' leverage is tantamount to continuing to overdraw residents' future purchasing power. It is not advisable to eat only what you eat.
The most practical thing is to start from the root, by injecting funds into real enterprises to underpin the economy, effectively increase residents' employment and achieve economic growth.
Secondly, the Federal Reserve is increasingly expected to raise interest rates. In order to promote the return of capital and facilitate its harvest and plunder, the United States is creating crises around the world. First, there were riots in Kazakhstan at the beginning of the year, and now the whole world is still staring at the situation in Russia and Ukraine. When the situation is so unstable, large-scale stimulus will only add chaos to the domestic capital market.
Flooding is actively creating inflation and pushing up asset bubbles. Isn't it also actively providing opportunities for dollar harvesting?
Obviously, China’s “me-first” monetary planning strategy will not do this!
Finally, the epidemic remains the biggest uncertainty.
China's economic environment is closely related to politics. Most of the time, politics determines the economy.
The first half of 2022 is the Winter Olympics, and the second half of the year is the 20th National Congress of the Communist Party of China. These two major events determine that China's "epidemic dynamics clearing policy" will become even stricter.
Because the focus of the Winter Olympics is for China to show its urban governance level to the world, in order to gain a certain amount of positive political support and returns on economic investment. Therefore, in the first half of 2022, the top domestic leaders will never allow the epidemic to get out of control. They will only take stricter precautions, and the cost must be the losses caused by the relative tightening of the economy.
In the second half of the year, before the official convening of the 20th National Congress, China will not be allowed to have any problems in various aspects such as people's livelihood security, economic stability, employment indicators, and epidemic control. This is political correctness!
Against this background, China’s monetary policy in 2022 will not be flooded with water!
China's GDP reached a new high in 2021, with the total GDP for the year reaching 114.3 trillion, an increase of 8.1% over the previous year.
According to preliminary accounting data released by the National Bureau of Statistics, high-tech manufacturing increased by 18.2% year-on-year, ranking first among all major industries.
Didn’t expect that?
What will drive GDP growth in 2021 is not the real estate industry, not the recovery of the consumer population, nor the growth of foreign trade, but high-tech manufacturing!
Among them, the output of new energy vehicles, industrial robots, integrated circuits, and microcomputer equipment increased by 145.6, 44.9, 33.3, and 22.3 respectively, maintaining strong growth momentum.
Under the premise that investment in real estate, construction and other industries continues to shrink, seriously dragging down GDP growth, the high-tech manufacturing industry has pushed GDP to a value of 8.1 with its ultra-high growth rate.
What does this mean?
The reform of the national economic structure has achieved initial results!
From the expression of monetary easing starting at the end of 2021, and the beginning of real money being released into the market in 2022, to today’s credit scale beginning to expand, the country has been moving forward to stabilize the economy, and every step has Walking very steadily!
However, this macroeconomic policy adjustment is like driving a car, you need to do it steadily:
Step on the accelerator lightly and feel the momentum of getting off;
If it doesn’t work, step on it harder;
If it still doesn’t work, step on it harder and harder until the car starts to start.
Today, after several active monetary policy controls, although funds are still idling, the main reason is that currency circulation has encountered congestion.
But we must understand that the introduction and implementation of all policies takes time and process, and all blockages need to be unblocked and solved bit by bit with visible hands.
Moreover, the effects have begun to appear, and the market has begun to have access to funds, right?
With this first step, there will be a second step. So is it still far behind to inject power into the real companies in the market and rebuild market confidence and expectations?
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