Liu Mingyan: Interpretation of financial data in the third quarter: monetary policy remains stable and price level drops significantly

 Liu Mingyan: Interpretation of financial data in the third quarter: monetary policy remains stable and price level drops significantly

On October 14, the peoples Bank of China disclosed the financial statistics of the third quarter of 2020. The market paid close attention to the scale of social financing, money supply, credit growth, price level and other data. In the context of fighting against the epidemic situation and the international economic situation, whether Chinas monetary policy implements its no flooding policy and adheres to a stable monetary policy? This paper attempts to answer from the data analysis of social financing scale, money supply, credit growth and price changes.

The expansion of bond financing scale promoted the rapid growth of social financing scale on a year-on-year basis. In the first three quarters of this year, the cumulative value of social financing scale was 29.62 trillion yuan, a year-on-year increase of 13.5%, compared with 11.40% in 2019, indicating that the central bank has implemented relatively loose monetary policy in response to the impact of the epidemic on the economy. However, from the perspective of the increment of social financing scale in the first, second and third quarters of this year being 11.08 trillion yuan, 9.76 trillion yuan and 8.79 trillion yuan respectively, monetary policy is returning to stability u3002 Loans and bond financing (including corporate bonds and government bonds) were the main factors driving the substantial growth of social financing. Among them, RMB loans increased by 16.69 trillion yuan, a year-on-year increase of 13%, 0.5 percentage points higher than that of the same period of last year. New bond financing was 11.41 trillion yuan, with a year-on-year increase of 20%, about 6 percentage points higher than that of the same period of last year The rapid growth of scale, because the government bonds accounted for 59% of the new bond financing, the rapid growth of government bond financing in the first three quarters is one of the reasons for the rapid growth of social financing scale.

M2 maintained a moderate growth, M1 hit a 31 month high, and monetary policy remained stable. At the end of this year, Chinas monetary policy kept a moderate growth rate of 10.5% compared with the same period of last year. At the end of September, M1 stock balance was 60.23 trillion yuan, an increase of 8.10% year-on-year, reaching a new high since March 2018, with a year-on-year increase of 4.7%. As M1 consists of cash (M0) and demand deposits, of which demand deposits account for 87%. The accelerated growth of M1 indicates that the financial market has reasonable and sufficient liquidity, laying the foundation for investment and consumption growth in the fourth quarter.

The fall of food prices makes CPI return to the second era, and the economic recovery pushes up the decline of PPI. CPI in September was 1.7%, down 0.7% month on month. The reason for CPI decline is that the increase of food price decreased from 11.2% in the previous period to 7.9%, and the rise of pork price decreased from 52.60% to 25.50% in the previous period, which had a greater impact. At the same time, PPI in September was - 2.1%, down 0.1% month on month, but rose by 1.6% compared with the low level in May, indicating that the market demand for enterprise products has improved significantly, but the demand has not returned to the pre epidemic level.

In short, the general tone of Chinas monetary policy remained stable in the first three quarters. The stable operation of the financial market and the sustained recovery of the economy indicate that the current monetary policy is suitable for the needs of economic development. In the future, the monetary policy will be carried out under the condition of maintaining a stable tone and making border adjustments according to actual needs.

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