Why Did Credit Data Plunge Sharply? M2 Growth Rate Deviates From It.

The new RMB loans in October were only 513 billion 600 million, down 6% compared to the same period last year, down 51% in the annulus ratio, significantly lower than expected, the credit structure was in a bad position, the proportion of short-term loans and bills financing increased significantly, the scale of bills charging was more serious, while the growth rate of residents' medium and long term loans declined, which was in line with the growth rate of real estate sales in October.

The credit data is much lower than expected. We think the main reasons are: 1..

From the economic data released yesterday, we can see that the growth rate of the traditional high energy consuming industries such as hydropower, gas and mining industry has dropped sharply, and the electricity generation has continued to explore the bottom. These traditional industries tend to focus more credit resources. From the sharp decline of the credit data and the slow growth of the traditional industries, we can see that the credit policy tilt has shifted and the support of the traditional industries has decreased.

In October, the new scale of social integration was only 4767 billion billion, a record low, much lower than market expectations.

Judging from the sub item, RMB loans are low in innovation and foreign currency loans continue to increase negatively, which is mainly related to the reduction of foreign currency liabilities of enterprises in the expectation of RMB depreciation. Corporate bond financing has dropped sharply compared with the previous 9 months. The scale of non-standard financing has declined sharply or is related to the non replacement of local debt replacement at the end of the year. At the same time, the financing of off balance sheet bills has decreased significantly, with a drop of more than the same level in the same period of history.

But it's going to be inventory - capacity clearing - innovative.

On the road, achieving economic growth is still a long way to go. With the decline of the velocity of money, the marginal effect of money is becoming weaker and weaker. It is a long-term need to maintain the low interest rate environment. It is still possible to lower the interest rate further. The bull market of bonds remains unchanged and investors need to be patient.

In October, M2 grew by 13.5% compared with the same period last year, while the credit growth rate dropped by 6% over the same period last year. Why is there such a departure from the opposite direction? As we emphasized in the earlier report, "why the bull market cycle is getting longer and longer", the current overall monetary creation has expanded from the creation of base money to the multiplication of money. However, the expansion of the monetary multiplier in the 11 years has not resulted from the credit expansion brought about by the effective demand, but rather the diversion of funds through the interbank business to the non-standard assets in the banking system, and the acceleration of the monetary expansion caused by the leverage of the funds in the fictitious economy.

However, when these funds have the characteristics of debt rolling and leveraging, they promote economic growth rather than asset bubbles.

Although 15 years ago, the off balance sheet credit started to return to the table, the funds used by banks for investment in securities only increased. The expansion of the monetary multiplier means the increase of capital leverage. And where the leverage is added depends on where there is demand. At present, the financial system shows stronger desire and motivation to increase leverage than the entity domain, and ultimately, the return on investment of the two systems has changed.

On the one hand, October

The increase in capital inflows is not only the performance of the market, but also from the rise of deposits in non financial institutions. At the same time, capital is at a low level, and the leverage in the bond system has also increased. Secondly, the 10 month has lowered the Reserve interest rate and the monetary multiplier has improved.

The growth rate can maintain a steady growth. However, as the capital leverage is more concentrated in the financial system, the currency has shrunk to the virtual speed, and the credit has shrunk dramatically, so it shows a larger deviation from the growth rate of M2.

At the same time, in October, the scissors gap formed between M1 and M2 was further expanded. Generally speaking, the difference between the M1-M2 and the yen widened indicates that deposits are being renewed, residents and enterprises are trading actively, and the economic boom has increased. Historically, when the difference rebounded, the economic cycle began to flourish, corresponding to the increase in industrial value, and the monetary cycle of the currency became deflation.

In the previous rounds, the difference between M1-M2 and the industrial added value was basically synchronous, and the inflection point was very similar.

However, the business cycle of this cycle is very special. The difference between M1-M2 and the industrial value added is not the same as the historical value added. Therefore, the fact that the deposit is on demand is that the virtual economy is still absorbing too much capital.

At the same time, the rise of M2 is also related to the increase in deposits. In October, the deposits of financial institutions increased by 7000-10000 billion over the same period in the first three years. It also pushed the growth rate of M2 to a certain extent, which led to a larger divergence between M2 and the real growth of financing demand, and its indicative meaning decreased.