New Social Financing Driven by Government Bonds, Says Ping An Securities
Ping An Securities has released a research report suggesting that new social financing in December 2023 was primarily driven by government bonds. The report also highlighted that the growth rate of social financing in the first quarter is likely to face downward pressure.
According to the report, the new social financing scale in December 2023 was 1.94 trillion yuan, marking an increase of over 600 billion yuan year-on-year, making it the third highest in the same period in history. The year-on-year growth rate of social financing stock increased by 0.1 percentage points to 9.5%.
The report also noted that the demand for medium- and long-term corporate loans weakened, and the vitality of the corporate sector remains insufficient. This was reflected in the year-on-year growth rate of M1, which remained unchanged at 1.3%, the lowest level since monthly statistics were collected in 1996.
Looking ahead to 2024, Ping An Securities pointed out that the economic growth momentum still depends on the “continuation” of government debt financing. The report speculates that in the first quarter of 2024, the growth rate of social financing may face certain downward pressure due to the slightly weaker pace of preparation for early approval of local government debt compared to the same period in 2023.
The research report also forecasts that social financing credit will show certain characteristics in 2023, including weak government debt financing in the first half of the year, on-balance sheet loans being strong in the first four months, and off-balance sheet financing maintaining an increase, but not enough to offset the decline in corporate direct financing.
In summary, the report from Ping An Securities suggests that the recovery momentum of China’s economy was strong in the first quarter of 2023 but dropped significantly in the second quarter. The government increased its “leverage” support, contributing to the relatively stable economic recovery momentum.
However, with uncertainties in the real estate industry and the pace and slope of export recovery in 2024, the report indicates that the boost of economic growth momentum will continue to depend on the “continuation” of government debt financing.