Recovering from differentiation - dismantling and analysis of social financing data Abstract In the first quarter, the growth rate of social financing bottomed out and rebounded.

The total amount of new social financing in 19Q1 was 8.2 trillion, an increase of 2.34 trillion compared with the same period in 2018.

Among them, loans increased by 1.44 trillion yuan year-on-year; bonds increased by 380 billion yuan year-on-year; local special bonds increased by 462 billion yuan year-on-year; and non-standard bonds increased by 194 billion yuan year-on-year.

As of March 2019, the year-on-year growth rate of social financing was 10.7%, an increase of 0.9 percentage points from the end of 2018.

The early issuance of local special bonds, the increase in loans and bond financing, and the slowdown in non-standard shrinkage have caused the growth rate of social financing to bottom out early in the first quarter of 2019.

Structural split of social finance data Government financing increased sharply.

The growth rate of the balance of local special bonds increased from about 20.4% at the end of 2018 to about 30.6% in March 2019, which is one of the factors for the rebound in social financing growth.

If national debt and local debt are further added to the social financing index, the constructed government + social financing growth rate index was 11.1% in March 2019, an increase of 1 percentage point from the end of 2018, of which government financing growth in March 2019

The speed is around 20%.

Residents’ financing fell from high levels, while corporate financing stabilized from low levels.

In 19Q1, the financing of the residential sector only increased by 45 billion yuan year-on-year, with a financing growth rate of about 17.6%, a decrease of 0.7 percentage points compared with the end of 2018.

The financing of the corporate sector increased by 1.67 trillion yuan year-on-year, with a financing growth rate of about 6.7%, an increase of 1.1 percentage points compared with the end of 2018.

Short-term corporate financing increased sharply, while medium- and long-term financing remained sluggish.

In 19Q1, corporate short-term financing increased by 1.2 trillion yuan year-on-year, with a growth rate of about 11.9%; while medium- and long-term financing only increased by 470 billion yuan year-on-year, with a growth rate of only about 4.9%, which is at a historical low.

The high increase in short-term financing is firstly due to the increase in bill financing caused by bill arbitrage in the first quarter; secondly, corporate financing was tight in 2018, and there will be a need to supplement liquidity and repay maturing debts in 2019; thirdly, companies are in the process of reducing value-added tax.

Under the influence, raw material inventories are replenished in advance, which also brings short-term financing growth.

The medium- and long-term financing of enterprises is more closely related to capital expenditures and is more sustainable than short-term financing.

The current sluggish growth rate of medium- and long-term financing may indicate that this round of corporate investment will not see a strong cyclical rebound, and the structural problems of corporate financing still need to be improved.

The growth rate of social financing stabilized throughout the year, and the bond market welcomed a rebound in May.

The rebound in corporate financing in 2019 may be limited.

This round of macro policies has changed compared with the previous ones. Strict supervision of real estate, restrictions on local government borrowing, and neutral monetary policy mean that we no longer rely on infrastructure and real estate to stimulate the economy, but rely on tax cuts to enhance the growth potential of the economy. Here

Against this background, corporate financing has no momentum to rebound significantly.

From the perspective of financing structure, it is difficult for non-standard assets to rebound significantly under the new asset management regulations; credit is released ahead of schedule in the first quarter, and we need to be wary of the possibility of falling short of expectations after the second quarter; bond financing increased sharply in the first quarter, but the terms are relatively short and the ratings are relatively high.

A sign that risk appetite remains low.

Taken together, corporate financing may only rebound slightly in 2019.

Both government and residents' financing are facing downward pressure from high levels.

In terms of government financing, based on the 2019 fiscal budget data, the annual government financing growth rate may be around 15%-16%, and the growth rate will gradually fall after 19Q2.

In terms of residents' financing, the growth rate of residents' credit has historically lagged slightly behind the growth rate of real estate sales. Currently, the growth rate of commercial housing sales area has turned negative, indicating that the growth rate of residents' credit may also have downward pressure.

The growth rate of social financing may stabilize in an L-shape throughout the year.

The transmission of loose money to loose credit in 2019 has taken effect, and corporate financing has picked up moderately; while the growth rates of government financing and household financing have fallen back from highs, the full-year growth rate of social financing will be around 11%, and the trend will be L-shaped.

This means that the economy may stabilize in an L-shape throughout the year and there will be no strong cyclical rebound.

The bond market welcomes a rebound.

On May 6, the central bank announced a targeted reserve requirement ratio cut for small and medium-sized banks, releasing about 280 billion yuan in long-term funds, which may alleviate the financial pressure caused by tax payments and the expiration of MLF in May.

Although the most loose period of monetary policy has passed, it has not been significantly tightened.

Coupled with the significant tax cuts this year, and based on comprehensive fiscal and monetary policies, liquidity may remain relatively loose this year.