{"id":4710,"date":"2024-02-21T10:50:19","date_gmt":"2024-02-21T10:50:19","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=4710"},"modified":"2025-03-27T15:50:44","modified_gmt":"2025-03-27T15:50:44","slug":"better-chinese-monetary-news","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=4710","title":{"rendered":"Better Chinese monetary news"},"content":{"rendered":"

Chinese monetary statistics for January suggest that policy easing is starting to become effective.<\/p>\n

Six-month growth of narrow money, as measured by true M1*, rebounded from a negative December reading to its highest level since May – see chart 1.<\/p>\n

Chart 1<\/strong><\/p>\n

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Q1 numbers can be volatile because of New Year timing effects, so improvement needs to be confirmed by February \/ March data.<\/p>\n

True M1 can be broken down into “private” and “public” sector components. The former aggregates currency in circulation and demand deposits of households and non-financial enterprises. The latter is calculated as a residual and is dominated by demand deposits of government departments and organisations.<\/p>\n

Six-month growth rates of both components rose in January but the public sector increase was much larger, consistent with funds being mobilised to boost fiscal spending – chart 2.<\/p>\n

Chart 2<\/strong><\/p>\n

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Progress in implementing fiscal stimulus is also suggested by a strong rise in central government deposits – these are excluded from money definitions but deployment of funds will have a positive monetary impact.<\/p>\n

The broader M2 measure continues to outpace narrow money, with six-month growth little changed in January, extending a recent sideways movement. In terms of the “credit counterparts”, domestic credit expansion has firmed since late 2023 but there has been an offsetting increase in non-monetary funding (“other liabilities”) – chart 3.<\/p>\n

Chart 3<\/strong><\/p>\n

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A reduction in the broad \/ narrow money growth gap driven by narrow acceleration is usually a positive economic signal, indicating a rise in broad money velocity.<\/p>\n

The January narrow money recovery, as noted, partly reflects implementation of fiscal spending plans. A sustained pick-up requires monetary policy to be sufficiently accommodative. Recent developments are promising. PBoC lending to the banking system grew by a record amount in Q4. Banks’ excess reserve ratio rose to 2.1%, the highest since Q4 2020 – before the recent 0.5 pp further reduction in the requirement ratio. The reserves injection has contributed to three-month SHIBOR reversing half of its August-December rise since the start of the year – chart 4. Currency weakness has remained contained despite softer rates; indeed, the JP Morgan effective index has risen slightly year-to-date.<\/p>\n

Chart 4<\/strong><\/p>\n

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Monetary deterioration into late 2023 argues for economic weakness through H1 2024. Confirmation that monetary trends have turned would suggest improving prospects for H2.<\/p>\n

*Official M1 plus household demand deposits. M1 conventionally includes such deposits but they are omitted from the Chinese official measure for historical reasons.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Chinese monetary statistics for January suggest that policy easing is starting to become effective. Six-month growth of narrow money, as measured by true M1*, rebounded from a negative December reading to its highest level since May – see chart 1. Chart 1 Q1 numbers can be volatile because of New Year timing effects, so improvement […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-4710","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4710","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4710"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4710\/revisions"}],"predecessor-version":[{"id":7019,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4710\/revisions\/7019"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4710"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4710"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4710"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}