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Macroeconomy Research
August 22, 2016
China Macro Weekly
“Uncertainty trap”: The story behind rising M1 growth
China’s narrow money (M1) grew 25.4% YoY in July, > 20% for a 5th
consecutive month. Its sequential growth of 26.8% MoM, SAAR, shows
no signs of slowing. In contrast, broad money (M2) growth was only
10.2% YoY in July, close to the historical low. What has caused M1
growth to persistently rise? When will it slow down?
Xiangrong YU
SAC Reg. No.: S0080115020007
SFC CE Ref: BFA907
[email protected]
We decompose incremental M1 using macro and listed-company data.
From 1Q15 to 1Q16:
►
The increase in demand deposits held by corporations and
public institutions was the main driver of M1 growth. M1
increased Rmb7.44trn, of which Rmb270bn (3.6%) came from
M0, Rmb4.26trn (57.2%) from corporate demand deposits and
Rmb2.91trn (39.1%) from public institutional demand deposits.
►
Real estate, construction and decoration companies
increased their liquidity holdings visibly. Cash held by listed
non-financial companies increased Rmb993bn (~13.3% of
incremental M1). Real estate and construction & decoration
companies contributed the most, Rmb248bn and Rmb170bn
respectively, representing a marked acceleration in growth.
Corporations face more of an “uncertainty trap” than a
“liquidity trap”. Despite the recent declines, the average investment
return and lending rate are still much higher than the demand deposit
rate in China, which does not support the liquidity trap hypothesis.
What’s behind the persistent M1 growth is increased policy uncertainty
over the past two years, coming from 1) the tricky balance
between reform and growth, 2) the complexity of counter–
cyclical management, and 3) exchange rate instability.
Probably the best footnote to the uncertainty trap is the shift
of property policy from easing to (partial) tightening in <2
years. Faced with uncertainty, it is a rational choice to hoard cash and
wait. Rising M1 growth may be a sign of the self-reinforcing episodes of
high policy uncertainty and low economic activity.
Without an obvious change in the policy setting, M1 growth
may not fall <20% in 2H16. While M1 growth may have peaked in
July, it will likely stay >20% YoY before November and hover around
20% in the last two months.
The real challenge to the conduct of monetary policy is the
effectiveness of transmission, that is, how to channel the hoarded
liquidity to the real economy, which cannot be done by the PBoC alone.
The only thing absent from the government’s growth stabilization
efforts in recent years is probably a genuine and effective cut of the tax
burden of the private sector, though the replacement of business tax
with value-added tax may help to some extent. Lowering corporate and
household taxes is the key to fostering investment and consumption,
thus enhancing monetary transmission. A consistent and
transparent policy setting will also help anchor market
expectations and boost economic activity.
Hong LIANG
SAC Reg. No.: S0080513050005
SFC CE Ref: AJD293
[email protected]
Related reports
•
Macroeconomy | What is behind July's
money and credit data? (2016.08.17)
•
Macroeconomy | August 8~12,
Cyclical
momentum
remains
(2016.08.16)
•
Macroeconomy | SDR bonds are coming
(2016.08.15)
•
Macroeconomy | How much should we read
into the monthly FAI data? (2016.08.15)
•
Macroeconomy | The PBoC's balance sheet
contracts as monetary policy turns neutral
(2016.08.14)
•
Macroeconomy | Fiscal expenditure growth
slowed sharply (2016.08.12)
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2016:
solid
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CICC Research: August 22, 2016
“Uncertainty trap”: The story behind rising M1
growth
M1 growth continued to climb and its gap with M2 growth widened further
(Figure 1). M1 growth reached 25.4% (prior: 24.6%) YoY in July, >20% for a 5th
consecutive month; on a sequential, seasonally-adjusted basis, M1 expanded 26.9%
(prior: 26.8%) MoM, SAAR, showing no sign of slowing. In stark contrast, M2 growth
was only 10.2% (prior: 11.8%) YoY in July, close to the historical low. The gap between
M1 and M2 growth has been widening and money has become more liquid.1
No matter the reason, M1 represents funds in transit. After the recent low of 2.9%
YoY last March, M1 growth has been rising for 16 months (except this February) and
continued to hit new highs since mid-2010. Such a long period of acceleration is not
often seen. What has caused M1 growth to persistently rise? Why doesn’t M1 growth fall?
When will it slow down?
Decomposing incremental M1
We first decompose incremental M1 in order to understand the drivers. As of July,
M1 totaled Rmb44.29trn, consisting of cash in circulation (M0, 14.3%) and demand
deposits held by corporations (42.5%) and public institutions (43.2%) but not
households. While M0 did not display an obvious pickup, the growth of corporate and
public institutional demand deposits jumped to 32.7% and 25.7% YoY in July
respectively, from last March’s -1.2% and 5.5% YoY (Figure 2).
Figure 1: The gap between M1 and M2 growth has
been widening
Figure 2: The growth rates of corporate and public
institutional demand deposits jumped
M0 (currency in circulation)
Corporate demand deposits
Public institutional demand deposits
ppt or %
M1 - M2 growth spread
M1 YoY growth
M2 YoY growth
35
% chg, YoY
40
30
25
20
15
10
5
0
-5
-10
-20
-15
2006
2007
2008
2009
2010
2011
2012
Source: Wind Info, CICC Research
2013
2014
2015
2016
2012
2013
2014
2015
2016
Source: Wind Info, CICC Research
1
See our reports Thoughts on rising M1 growth, published May 4, and Liquidity trap or uncertainty trap: why is M1 growth still rising?, published
July 25.
Please read carefully the important disclosures at the end of this report
2
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This CICC report is provided for the exclusive use of [email protected].
CICC Research: August 22, 2016
Using macro and listed-company data, we further explored each
component’s contribution to the incremental M1 (Figure 3). Due to data
availability, we compared the data at end-1Q16 and those at end-1Q15:
►
The increase of demand deposits held by corporations and public
institutions was the main driver of M1 growth. From 1Q15 to 1Q16, M1
increased Rmb7.44trn, of which Rmb270bn (3.6%) came from M0, Rmb4.26trn
(57.2%) from corporate demand deposits and Rmb2.91trn (39.1%) from public
institutional demand deposits.
►
Real estate, construction and decoration companies increased their
liquidity holdings visibly. During the same period, cash and cash equivalents
held by listed non-financial companies increased Rmb993bn (~13.3% of
incremental M1). Real estate and construction & decoration companies contributed
the most, by Rmb248bn and Rmb170bn respectively, representing a marked
acceleration in growth. Cash held by listed SOEs and non-SOEs increased
Rmb502bn and Rmb490bn respectively, roughly the same.
Despite a lack of detailed data, social security funds (especially pension funds) and the
housing provident fund should be important sources of public institutional deposits. As
of end-2015, the balances of the national social insurance fund and housing provident
fund were Rmb5.51trn and Rmb4.07trn, respectively. The 2012 audit results revealed
that 38.44% of the national social insurance fund was held in demand deposits. The
expansion of the population making social security and housing provident fund
contributions may have pushed up public institutional demand deposits. In addition,
demand deposits held by non-listed companies, which include many local government
financing vehicles (LGFVs), increased Rmb3.64trn (~49% of incremental M1).
Figure 3: Decomposing incremental M1
Contribution to
Change in M1 (Rm b bn) M1 change (%)
M1 m oney stock (Rm b bn)
M1
Corporate demand deposits
Held by listed non-financial companies
By ow nership
By sector
1Q14
1Q15
32,768
33,721
41,158
1Q16 1Q14-1Q15 1Q15-1Q16
953
7,437
1Q15-1Q16
100.0
13,425
13,270
17,527
-155
4,257
57.2
3,692
4,216
5,209
523
993
13.3
SOEs
2,528
2,855
3,358
328
502
6.8
Non-SOEs
1,165
1,360
1,851
196
490
6.6
Real estate
349
386
634
37
248
3.3
Construction & Decoration
523
551
721
28
170
2.3
Chemicals
120
194
270
74
76
1.0
Auto & Parts
253
270
329
16
59
0.8
2,447
2,815
3,255
368
439
5.9
Others
Held by non-listed companies
Public institutional demand deposits
M0 (currency in circulation)
9,733
8,675
12,320
-1,057
3,645
49.0
13,510
14,256
17,166
746
2,910
39.1
5,833
6,195
6,465
362
270
3.6
Source: Wind Info, CICC Research
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CICC Research: August 22, 2016
Reasons for rising M1 growth
The data analysis above helps us understand the driving forces behind the rising M1
growth. On August 15, the PBoC also communicated on the reasons for the widening
gap between M1 and M2 growth, and it was consistent with our view.2 Behind the M1
growth acceleration, we note that:
►
Continuous rate cuts have significantly lowered the opportunity cost to
hold liquid funds. The PBoC has delivered six interest rate cuts since November
2014, lowering the 1-year time deposit rate from 3.0% to 1.5% while keeping the
demand deposit rate constant at 0.35%. The spread between them has narrowed
by 1.5ppt, boosting liquidity demand by market participants (Figure 4). This may
have explained the expansion of all components of M1. Moreover, individuals and
corporations may wait until their time deposits mature and then keep them in liquid
form, generating a time lag between rate cuts and M1 growth.
►
When booming property sales meet sluggish investment, developers
accumulate deposits. Thanks to more lenient property policy and monetary
easing, property sales have picked up significantly since early 2015. Over
January~July 2016, property sales increased 39.8% YoY while property investment
grew only 5.3% (Figure 5). In 1H16, personal mortgage loans expanded 30.9%
YoY. A large amount of household deposits and leveraged funds flowed to property
companies. As surging sales meet sluggish investment, large sales proceeds sit on
developers’ accounts and their demand deposits have increased accordingly
(Figure 6). This echoes the substantial increase of liquid funds held by real estate
and construction & decoration companies in M1.
►
Fiscal loosening boosts M1 growth. Fiscal spending has accelerated notably
since 2H15, leading to an effective fiscal deficit of 3.5% of GDP in 2015. Over
January~July 2016, fiscal expenditure grew 13.0% YoY, much faster than the 6.5%
growth of fiscal revenue. Furthermore, a total of Rmb6.11trn in swap bonds has
been issued under the local government debt swap program along with
Rmb1.64trn in new bonds issued to support local finance since May 2015 (Figure 7).
When fiscal and quasi-fiscal spending increases, more fiscal funds that are
appropriated but not yet spent tend to float in the accounts of corporations and
public institutions. This should be a reason for the increase of demand deposits
held by non-listed companies (including LGFVs) and public institutions in M1.
These factors are important, but their impact seems to be weakening. It has
been ten months since the most recent rate cut (last October). The cost of holding
money has been decreasing for a while and the demand for liquidity should have been
unleashed to some extent. Property sales have been recovering for more than a year
and inventories have declined notably. If the trend takes hold, there is a reason to
expect property investment to gradually catch up; conversely, developers should use
liquid funds to repay debt. Although there were leakages of fiscal funds, the Ministry of
Finance (MoF) has already asked local governments to strengthen the management of
treasury funds, accelerate the process of debt swaps and mobilize carry-over funds. In
particular, the MoF has required the proceeds from publicly offered swap bonds to be
used to repay existing debt within a month.3 Why doesn’t M1 growth fall?
2
3
See our report What is behind July’s money and credit data? , published August 17.
See our report Quicker local debt repayment may further distort financial data, published May 25.
Please read carefully the important disclosures at the end of this report
4
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CICC Research: August 22, 2016
“Liquidity trap” or “uncertainty trap”?
The acceleration of M1 growth has lasted so long. What’s different this time?
Rising M1 growth is often seen as an indicator of strong business confidence and
heightened inflationary pressure. China’s historical data also exhibit tight associations
between M1 expansion and GDP growth and inflation. One would thus expect M1
growth to moderate as business activities catch up and the transitory liquidity flows
back into the real economy. However, this time seems different. M1 acceleration has
been more prolonged than usual. Moreover, economic activities and prices seem to have
decoupled from the rising M1 growth. In July, the monthly growth of fixed asset
investment slid to 3.9% (prior: 7.4%) YoY; private investment shrank 1.2% (prior:
-0.1%) YoY; and real estate investment growth slowed further to 1.2% (prior: 3.6%)
YoY. CPI growth was only 1.8% YoY; the decline in PPI narrowed to -1.7%, but the
inflation momentum is still relatively subdued.
Figure 4: Continuous rate cuts increased liquidity
demand of various market participants
%, YoY
45
Figure 5: Property sales grew faster than property
investment
ppt
0
M1 growth (LHS)
1Y deposit rate - demand deposit rate (RHS)
40
%, YTD
100
Real estate investment growth
Property sales growth
0.5
35
80
1
60
30
1.5
40
25
2
20
20
2.5
15
-20
3.5
5
0
2006
0
3
10
-40
4
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Wind Info, CICC Research
Source: Wind Info, CICC Research
Figure 6: Large property sales proceeds sat on the
accounts of developers
Figure 7: Massive local government bond issuance
led to the accumulation of fiscal funds
% chg, YoY
45
% chg, YoY
200
M1 (LHS)
Replacement
Property sales (6mma; RHS)
New issuance
Rmb bn
1,200
40
1,000
150
35
800
30
100
25
600
20
50
400
15
10
0
200
5
0
2006
0
-50
2007
2008
2009
2010
2011
2012
Source: Wind Info, CICC Research
2013
2014
2015
2016
15/05
15/07
15/09
15/11
16/01
16/03
16/05
16/07
Source: Wind Info, CICC Research
There has been one theory floating around that companies may be falling into a
“liquidity trap”, a situation in which they are unwilling to invest because of low returns.
Despite the recent declines, measured by the ROE of industrial enterprises or listed
companies, the average investment return is still much higher than the demand deposit
rate in China (Figure 8). In the meantime, the weighted average lending rate also far
exceeds the demand deposit rate; even if corporations lack the incentive to invest, they
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CICC Research: August 22, 2016
should mobilize liquid funds to pay down their debt. Limited progress in investment and
deleveraging does not seem to support the liquidity trap hypothesis. The PBoC also
officially refuted liquidity trap claims.4
In our view, it is more of an “uncertainty trap” than a “liquidity trap”. What’s
different this time is that there has been increased economic and policy uncertainty over
the past two years. A news-based economic policy uncertainty index for China has
trended up significantly and reached a historical high, even higher than the level in the
aftermath of the global financial crisis (Figure 9).5 The uncertainty mainly comes from:
►
The tricky balance between structural reforms and growth stabilization.
In the transition to a new normal, China has to push forward supply-side reforms.
Despite the clear direction, the timetable, roadmap and implementation of the
reforms are associated with substantial uncertainties and a lack of clear policy
communication. Meanwhile, there is also a need to maintain a reasonable growth
rate in order to keep unemployment pressures and financial risks at bay. The tricky
balance between these policy objectives leaves corporations with murky
investment prospects.
►
The complexity of counter-cyclical management and policy coordination.
Multiple objectives also make the conduct of counter-cyclical policies less
straightforward. Over the past two years, the market has been concerned about
possible shifts in monetary, fiscal and industrial policy stances (e.g. home purchase
restrictions). For example, the rise and fall of credit data this year has attracted
much market attention (Figure 10). New Rmb loans amounted to only Rmb463.6bn
in July (prior: Rmb1.38trn) and total corporate loans contracted for the first time
since August 2005. Behind this is the challenges posed on macroeconomic
management by the additional need to curb asset bubbles and financial risks. In
the financial realm, a potential restructuring of the regulatory framework poses
additional uncertainty.
►
Exchange rate instability. Since the RMB devaluation in August 2015, worries
for its further depreciation have been lingering in the market and the currency
volatility has indeed also increased considerably (Figure 11). The PBoC has pledged
to keep the RMB basically stable and introduced a new and transparent formation
mechanism for the Rmb’s fixing rate. Nevertheless, the RMB has depreciated 4.92%
against the US$ and 9.90% against the CFETS basket since August 11, 2015, and
weakened 2.35% against the US dollar and 6.76% against the basket YTD.
Recently, the RMB temporarily stabilized given the US dollar’s weakness, the
forthcoming G20 summit, and the renminbi’s formal inclusion in the SDR basket in
October. But looking ahead to end-2016 or beyond, market expectations are not
well anchored and the FX policy reform is still an unfinished game. If all
corporations were to attempt to swap their renminbi funds into FX assets, they
would be distracted from domestic investment.
Rising M1 growth may be a sign of the self-reinforcing episodes of high
policy uncertainty and low economic activity. Faced with uncertainty, it may be a
rational choice to hoard cash and wait. Economic and policy uncertainty makes
corporations reluctant to invest or repay debt, discouraging economic activity. This in
turn makes it more difficult for policymakers to strike a balance between reform and
growth or even leads to policy setbacks, heightening policy uncertainty even further.
Moreover, medium-/long-term uncertainty may encourage short-term speculation,
lifting the speculative demand for liquidity and reinforcing the difficulty of policymaking.
4
See our report What is behind July’s money and credit data?, published August 17.
Baker, Scott, Nicholas Bloom and Steven J. Davis, 2013. "Measuring Economic Policy Uncertainty", working paper, University of Chicago; data
available at www.PolicyUncertainty.com.
5
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6
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CICC Research: August 22, 2016
Figure 8: Investment returns are still higher than
the demand deposit rate
ROE: Industrial enterprises
ROE: Listed non-financial companies
Weighted average lending rate
Demand deposit rate
Figure 9: A news-based economic policy
uncertainty index for China has trended up
%
25
Mean[1995~2011]=100
350
News-based EPU index (6mma)
300
20
250
15
200
150
10
100
5
50
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Wind Info, CEIC, CICC Research
Source: Baker, Bloom and Davis (2013), CICC Research
Figure 10: There have been rises and falls in credit
data this year
Figure 11: RMB has depreciated against both
CFETS basket and USD since August 2015
Total new loans
New corporate loans
Rmb bn
3,000
2014/12/31=100
108
CFETS RMB index (LHS)
Rmb per US$
6
US$/RMB closing (RHS)
2,500
6.1
106
6.2
104
2,000
6.3
102
6.4
1,500
100
1,000
98
6.5
6.6
96
6.7
500
94
0
-500
11/01 11/07 12/01 12/07 13/01 13/07 14/01 14/07 15/01 15/07 16/01 16/07
Source: Wind Info, CICC Research
6.8
92
90
15/01
6.9
7
15/04
15/07
15/10
16/01
16/04
16/07
Source: Bloomberg, Wind Info, CICC Research
Finally, we examine the evolution of property policy in the past two years as
a footnote for the uncertainty trap. In 2H14, the government began loosening
home purchase restrictions and mortgage policies to stabilize the property market. In
2015, property destocking became the primary goal of property policy. Property sales
began to pick up in early 2015 and property prices also bottomed out and rebounded in
4Q15, first in Shenzhen and Shanghai and then in more cities. But this year, Shanghai,
Shenzhen and some other cities with fast-rising property prices moved to tighten home
purchase restrictions and mortgage policies to curb the overheating property market.6
Property policy shifted from easing to (partial) tightening in less than two years (Figure
12). Destocking policy delivered immediate results (Figure 13), but the fast shift in
policy cannot provide stable expectations for property developers. A more fundamental
question behind this is whether demand-side policy is the right solution to the problems.
We believe the problems in the property market are on the supply side. The only way
out is to increase land supply, lower land prices, push ahead household registration
system reform and build a tiered housing system (Figure 14).
6
See our report Home purchase restriction once again, published March 28.
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7
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CICC Research: August 22, 2016
Figure 12: Property policy shifted from easing to partial tightening in <2 years
Date
Coverage
2014/09/30 Nationw ide
2015/03/30 Nationw ide
2015/09/30 Nationw ide
2016/02/02 Nationw ide
2016/02/19 Nationw ide
2016/03/25 Shanghai
2016/03/25 Shenzhen
2016/03/25
Wuhan
2016/04/01 Langfang
2016/08/11
Nanjing
2016/08/11
Suzhou
Measure
Dow n payment ratio for residents w hose family have 1 unit but no outstanding mortgage shall be equal
to that for residents w hose family purchase the first unit, w hich shall not be <30%; and the low er limit
of mortgage loans shall be 0.7X benchmark rate.
Dow n payment ratio for residents w hose family have 1 unit but no outstanding mortgage shall not be
<40%; dow n payment ratio of using housing provident fund for mortgage loans to purchase the first unit
shall not be <20%; and dow n payment ratio of using housing provident fund for mortgage loans for
residents w hose family have 1 unit but no outstanding mortgage shall not be <30%.
In cities w ithout home purchase restrictions, dow n payment ratio for the first unit should not be <25%;
and housing provident fund submitted in one city can be used for mortgage loans in other cities.
In cities w ithout home purchase restrictions, in principle, dow n payment ratio for the first unit should not
be <25% , but can be low ered by 5% depending on circumstances; and dow n payment ratio for
residents w hose family have 1 unit and outstanding mortgage shall not be <30%.
Deed tax rate shall be reduced from 3% to 1.5% for the first unit and 2% for the second unit; sales tax
shall be exempted for non-ordinary units held over 2 years; w hile the tier-1 cities only offer the
reduction of deed tax for the first unit.
Extend the mandatory social security term from 2 years to 5 years; increase dow n payment ratio to
50% for second-home buyers, and 70% for non-ordinary residential units.
Permanent residents of Shenzhen shall purchase no more than 2 units, and no more than 1 for qualified
non-local residents; dow n payment ratio shall not be <40% for residents w hose family do not ow n units
but have mortgage record in past 2 years, and for residents w hose family have 1 unit but no
outstanding mortgage.
The maximum limit of housing provident fund for mortgage loans are adjusted dow n from Rmb600,000 to
Rmb500,000.
Non-local residents shall purchase no more than 1 unit and dow n payment ratio shall not be <30%.
Dow n payment ratio for residents w hose family have 1 unit but no outstanding mortgage shall not be
<35%; and dow n payment ratio for residents w hose family have 1 unit and outstanding mortgage shall
not be <50%.
Dow n payment ratio for residents w hose family have 1 unit and outstanding mortgage shall not be
<50%; only qualified non-local residents can purchase the second unit; and dow n payment ratio of
using housing provident fund for mortgage loans of the second unit shall not be <30%, and mortgage
loan rate shall be 1.1X that for the first unit.
Direction
Easing
Easing
Easing
Easing
Easing
Tightening
Tightening
Tightening
Tightening
Tightening
Tightening
Source: CICC Research
Future trend of M1 growth
M1 growth may not fall <20% in 2H16 (Figure 15). Based on the pattern of
historical sequential M1 changes and taking into account the persistence of its growth in
the uncertainty trap, our forecasts show that:
►
M1 YoY growth may have peaked in July, especially considering the high
base in August last year;
►
M1 growth may stay >20% YoY before November and hover around 20%
in the last two months.
A consistent and transparent macro policy setting will help anchor market
expectations and boost economic activity. The above is a simple scenario analysis
and the actual development will still depend on economic and policy factors. But even in
extreme cases, M1 growth may still fall in the range of 13.6~26.5% by the end of 2016,
which is not low.
The real challenge to the conduct of monetary policy is the effectiveness of
transmission. The slowdown in July’s money and credit growth reflects the PBoC’s
intention to implement a neutral and accommodative policy stance so as to facilitate
supply-side reforms. In a bid to guide market expectations, the central bank stressed
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that the balanced growth of money and credit may have declined against the backdrop
of supply-side reforms and economic rebalancing. That said, the PBoC’s policy
ultimately depends on economic and inflation trends. The weighted-average lending
rate of 5.26% was already well below the nominal GDP growth of 7.3% in 2Q16. The
current policy setting is in stark contrast to deflation of early last year. We think China’s
economy is still on a moderate reflation path, and this will constrain the room for further
monetary easing. The widening gap between M1 and M2 growth suggests that the real
challenge to the conduct of monetary policy is how to channel the hoarded liquidity to
the real economy, which cannot be done by the PBoC alone. We believe fiscal policy
should play a more proactive role. The only thing absent from the government’s
growth stabilization efforts in the past two years is probably a genuine and
effective cut in the tax burden of the private sector, though the replacement of
business tax with value-added tax may help to some extent. Lowering corporate and
household taxes is the key to stimulate private investment and personal consumption,
enhancing the effectiveness of monetary transmission.
Figure 13: Property inventories fell notably
Months
40
Sellable area/Monthly sales
Overall
Tier-1
Tier-2
Figure 14: Land supply is the key to the property
problems
Residential land supply (3mma)
Tier 1
Tier-3
Tier 2
% chg, YoY
300
Tier 3
35
250
30
200
25
150
20
100
15
50
10
0
5
-50
0
12/01
12/07
13/01
13/07
14/01
14/07
15/01
15/07
16/01
Source: CREIS, CICC Research
-100
2011
2012
2013
2014
2015
2016
Source: Wind Info, CICC Research
Figure 15: M1 growth may not fall <20% in 2H16
M1 growth
%, YoY
30
25
20
15
10
5
0
Source: Wind Info, CICC Research
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Figure 16: China's key economic indicators and forecasts
Economic Growth
GDP
GDP
GDP
2015/12
2016/1
2016/2
2016/3
2016/4
2016/5
2016/6
2016/7
2015
Annual
2016E
2017E
Current
YoY
QoQ (sa)
Rmb bn
%
%
19,225
6.8
1.5
-
-
16,071
6.7
1.2
-
-
17,993
6.7
1.8
-
68,551
6.9
-
6.7
6.7
Nominal GDP
Nominal GDP
GDP deflator
YoY
YoY
%
%
6.1
-0.6
-
-
7.1
0.4
-
-
7.3
0.6
-
6.4
-0.5
8.1
1.3
8.2
1.4
Contribution to GDP Growth
Final Consumption Expenditure
Gross Capital Formation
Net Exports of Goods & Services
YTD
YTD
YTD
ppt.
ppt.
ppt.
4.1
2.9
-0.1
-
-
5.7
2.4
-1.4
-
-
4.9
2.5
-0.7
-
4.1
2.9
-0.1
Inflation
CPI
Food CPI
Nonfood CPI
PPI
YoY
YoY
YoY
YoY
%
%
%
%
1.6
2.7
1.1
-5.9
1.8
4.1
1.2
-5.3
2.3
7.3
1.0
-4.9
2.3
7.6
1.0
-4.3
2.3
7.4
1.1
-3.4
2.0
5.9
1.1
-2.8
1.9
4.6
1.2
-2.6
1.8
3.3
1.4
-1.7
1.4
2.3
1.0
-5.2
1.9
1.8
-2.2
1.2
Index
Index
%
%
49.7
48.2
49.4
48.4
49.0
48.0
50.2
49.7
50.1
49.4
50.1
49.2
50.0
48.6
49.9
50.6
-
Industry
Industrial Value-added
Industrial Value-added
YoY
MoM (sa)
%
%
5.9
0.45
0.44
5.4
0.40
6.8
0.63
6.0
0.44
6.0
0.45
6.2
0.50
6.0
0.52
6.1
-
6.0
6.0
Profits of Industrial Enterprises
Total profits
YoY, YTD
%
-2.3
-
4.8
7.4
6.5
6.4
6.2
Retail Sales
Retail sales
Retail sales
YoY
MoM (sa)
%
%
11.1
0.85
0.90
10.2
0.58
10.5
0.98
10.1
0.82
10.0
0.77
10.6
0.92
10.2
0.75
10.7
-
10.7
10.5
Investment
FAI
Manufacturing Investment
Infrastructure Investment
Real Estate Development Inv.
FAI
YoY, YTD
YoY, YTD
YoY, YTD
YoY, YTD
MoM (sa)
%
%
%
%
%
10.0
8.1
17.3
1.0
0.71
0.65
10.2
7.5
15.7
3.0
0.60
10.7
6.4
19.2
6.2
0.62
10.5
6.0
19.7
7.2
0.50
9.6
4.6
19.8
7.0
0.52
9.0
3.3
20.3
6.1
0.45
8.1
3.0
18.7
5.3
0.31
10.0
8.1
17.3
1.0
-
11.3
11.8
Real Estate
Sales of Commodity Buildings
Sales of Commodity Buildings
Area Newly-started
Area Under Construction
YoY, YTD
YoY, YTD
YoY, YTD
YoY, YTD
%
%
%
%
14.4
6.5
-14.0
1.3
-
43.6
28.2
13.7
5.9
54.1
33.1
19.2
5.8
55.9
36.5
21.4
5.8
50.7
33.2
18.3
5.6
42.1
27.9
14.9
5.0
39.8
26.4
13.7
4.8
14.4
6.5
-14.0
1.3
External Trade and Investment
Exports
Imports
Trade Surplus
FDI
YoY
YoY
Current
Current
%
%
US$ bn
US$ bn
-1.6
-7.4
59.6
13.9
-11.4
-19.0
60.9
12.0
-25.3
-13.8
30.5
17.9
11.5
-7.6
27.4
10.2
-1.8
-10.9
43.1
20.0
-4.1
-0.4
47.3
13.4
-4.9
-8.4
47.9
15.3
-4.4
-12.5
52.3
13.9
-2.9
-14.2
593
126
-3.8
-5.4
599
1.8
3.2
587
Balance
92
-
-
39
-
-
59
-
Balance
Outstanding
US$ bn
%
US$ bn
US$ bn
-166
3,330
3,231
3,202
-123
3,213
3,220
3,192
-94
3,205
3,201
293
0.3
-504
3,330
YoY
YoY
Current
%
%
Rmb bn
14.2
0.8
-1,326
-
6.5
12.2
621
7.7
20.3
-528
15.0
4.6
241
7.7
17.8
0
1.9
20.3
-700
3.7
0.3
200
8.4
15.8
-2,355
YoY
YoY
YoY
Increment
Increment
Increment
Increment
Increment
%
%
%
Rmb bn
Rmb bn
Rmb bn
Rmb bn
Rmb bn
13.3
15.2
4.9
-37
598
1,811
-1,458
-708
14.0
18.6
15.1
2,040
2,510
3,425
512
-645
13.3
17.4
-4.8
847
727
824
-169
-228
13.4
22.1
4.4
2,520
1,370
2,404
-174
-145
12.8
22.9
6.0
832
556
787
932
-54
11.8
23.7
6.3
1,830
986
684
162
-54
11.8
24.6
7.2
2,460
1,380
1,629
-330
-98
10.2
25.4
7.2
507
464
546
488
-191
13.3
15.2
4.9
14,970
11,720
15,409
-91
-2,214
Interest rates and RRR
1-year Deposit Rate
1-year Lending Rate
RRR
End of Period
End of Period
End of Period
%
%
%
1.50
4.35
17.5
1.50
4.35
17.5
1.50
4.35
17.5
1.50
4.35
17.0
1.50
4.35
17.0
1.50
4.35
17.0
1.50
4.35
17.0
1.50
4.35
17.0
1.50
4.35
17.5
Exchange Rates
RMB/US$, PBoC's fixing rate
RMB/US$, spot rate
NEER
REER
End of Period
End of Period
Current
Current
Rmb/US$
Rmb/US$
2010=100
2010=100
6.49
6.49
125.9
130.3
6.55
6.58
124.9
129.8
6.55
6.55
123.9
130.9
6.46
6.47
123.0
128.7
6.46
6.49
121.3
126.3
6.58
6.58
121.1
125.2
6.63
6.64
119.5
123.1
6.65
6.65
117.9
121.7
6.49
6.49
-
PMI
PMI
HSBC/Markit PMI
Balance of Payment
Current Account
% of GDP
Capital and Financial Account
Foreign Exchange Reserves
Fiscal
Fiscal Revenue
Fiscal Expenditure
Fiscal Surplus/Deficit
Monetary
M2
M1
M0
New Deposits
New Loans
Total social financing
Change of Fiscal Deposits
PBoC's Foreign Exchange
-2.3
Source: NBS, General Administration of Customs, PBoC, SAFE, MoF, MoC, Markit, CEIC, Wind Info, CICC Research
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-2,200
13.0
13.0
13,900
15,100
1.50
4.35
16.5
6.68
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V150902
Translation: Jincheng HUANG
Editing: Jim SATKO
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