Financial performance remained sound and stable in July, as reflectedin that, money supply M2 grew steadily and growth of RMB loans moderated withshort-term loans and paper financing rising steadily while growth of medium-and long-term loans slowed down; savings deposits increased fast and enterprisedeposits dropped by a larger margin; money market witnessed active transactionswith interest rate recovering slightly; RMB exchange rate remained stable afterthe reform of the exchange rate regime.
Broad money (M2)grew steadily, while growth of narrow money (M1) decelerated. At end-July, M2stood at RMB27.7 trillion yuan, increasing by 16.3 percent on a year-on-yearbasis, with the growth increasingby 0.6 percentage points from a month before. Money supply is consistent with the current economicgrowth. M1 reached RMB9.77 trillion yuan, increasing year-on-year by 11 percent,0.3 percentage points lower from a month before. The annualized month-on-monthgrowth rate of M2 at end-July was 10 percent after seasonally adjusted, 5.3percentage points lower than end-June, while that of M1 was 10.8 percent afterseasonally adjusted, 24 percentage points lower from end-June. The main reasonfor M1 decline is that: first, decrease of demand deposits of enterprisesaccelerated, and second, loans in July shrank and derivative deposits dropped.
Cash incirculation (M0) increased year-on-year by 9.1 percent to RMB2.12 trillion yuan,with the growth decreasing by 0.6 percentage points from June or by 2.7percentage points from a year earlier. Cash injection reached RMB32.2 billionyuan in July alone, RMB6.9 billion yuan less than that of June.
At end-July, outstandingloans denominated in both local and foreign currencies in all financialinstitutions reached RMB19.8 trillion yuan, increasing by 13 percentyear-on-year, down by 0.2 and 2.9 percentage points from end-June and a yearearlier respectively. RMB loans increased year-on-year by 13.1 percent toRMB18.59 trillion yuan, down by 0.2 and 2.4 percentage points from end-June anda year earlier respectively.
July is always theoff-season for lending in recent years. RMB loans fell by RMB32.1 billion yuanin July, RMB30.1 billion yuan more than the shrinkage registered a yearearlier. In particular, short-term loans and paper financing in July decreasedby RMB52.9 billion yuan, RMB4.6 billion yuan more than a year earlier; newmedium- and long-term loans fell by RMB28.6 billion yuan to RMB21.7 billionyuan. New loans granted to households stood at RMB12.8 billion yuan, RMB21.3billion yuan less than that recorded a year earlier. New loans issued tonon-financial institutions and other sectors slid by RMB44.8 billion yuan,RMB8.8 billion yuan more than that recorded a year earlier. At end-July, mediumand long-term loans increased by 20.1 percent to RMB7.61 trillion yuan, down by0.6 and 8.9 percentage points from end-June and a year earlier respectively;short-term loans and paper financing increased by 9.3 percent to RMB10.03trillion yuan, with a growth same as June but decreasing by 0.2 percentagepoints from a year earlier.
Outstandingdeposits denominated in both local and foreign currencies in all financialinstitutions reached RMB28.37 trillion yuan at end-July, increasing by 16.8percent from a year earlier, 0.02 percentage points higher than that recordedat end-June. In particular, outstanding household deposits denominated in bothlocal and foreign currencies grew by 17 percent to RMB14.16trillion yuan, up by 0.4 percentage points from the previou month. Deposits of non-financial institutions climbed by 17.2 percent to RMB12.63trillion yuan, up by 0.02 percentage points from a year earlier.
RMB deposits grewby 17.6 percent year-on-year to RMB27.07 trillion yuan, up by 0.4 percentagepoints from end-June. In particular, household RMB deposits grew by 17 percentto RMB13.37 trillion yuan, 0.7 percentage points from end-June.
New RMB depositsin July totaled RMB158.2 billion yuan, 106 billion yuan more than that recordeda year earlier; new household deposits reached RMB131.6 billion yuan, RMB85.6billion yuan more than a year earlier. In particular, new time deposits increased by RMB76.2 billion yuan andnew demand deposits by RMB9.3 billion yuan on year-on-year basis; new corporatedeposits declined by RMB153.8 billion yuan, RMB38.3 billion yuan more than thedecline recorded in the same period of last year.
Outstandingdeposits denominated in foreign currencies reduced by USD4.8 billion toUSD160.5 billion. In particular, household foreign currency deposits fell byUSD0.8 billion, USD3 billion more than the decrease recorded a year earlier.Demand deposits of units descended by USD3.5 billion, USD3.9 billion more thanthe decrease recorded a year earlier, which is related to the depositadjustment made by households and enterprises after the release of the reformmeasures on RMB exchange rate formation mechanism. In general, the influence ismoderated. Cumulative increase of foreign currency deposits in the first sevenmonths totaled USD5.7 billion, with the growth increasing year-on year by USD1.2billion.
Inter-bank marketwitnessed acceleration in the growth of RMB transaction volume, with interestrates recovering slightly. In July, RMB transactions in inter-bank markettotaled RMB2.12 trillion yuan, with a daily average of RMB100.9 billion yuan,increasing by RMB49.5 billion yuan or 96.2 percent compared with a yearearlier. The monthly-weighted interest rate for inter-bank borrowing averagedat 1.44 percent, down by 0.02 percentage points from the end of July; and thatfor pledge-based bond repurchase and sell- and buy-back bond repurchaseaveraged at 1.18 and 1.44 percent, up by 0.08 and 0.22 percentage points fromthe previous month respectively.
OnJuly 21st, the PBC announced the reform on improvement of the RMBexchange rate formation mechanism with an appreciation of 2 percent against thedollar. RMBexchange rate remained stable after the appreciation, being at 8.1080 yuan perUS dollar at the end of July.
