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Part 1 Monetary and Credit Performance
In the first half of 2010 the trend in the growth of money and credit turned to normal from the high in 2009. The first half of 2010 also witnessed adequate liquidity in the banking system, stronger flexibility of the RMB exchange rate, and sound financial performance.
I. The growth of money supply slowed down
At end-June 2010, outstanding M2 registered 67.4 trillion yuan, up 18.5 percent year on year, a deceleration of 9.2 percentage points over the end of 2009. Outstanding M1 stood at 24.1 trillion yuan, an increase of 24.6 percent year on year, a deceleration of 7.8 percentage points. Outstanding M0 totaled 3.9 trillion yuan, up 15.7 percent year on year, an acceleration of 3.9 percentage points over the end of the previous year. Net cash injections reached 65.8 billion yuan, 123.6 billion yuan more year on year.
Aggregate money growth gradually slowed down, as M2 and M1 declined by 4.0 percentage points and 5.3 percentage points respectively over the end of Q1 2010. Under the monetary policy mix, money growth has been in line with the macroeconomic goals, providing a money and financial environment facilitating stable economic development. M1 growth exceeded that of M2 for 10 consecutive months, indicating adequate liquidity.
II. Deposit growth slowed down
At end-June, outstanding loans in domestic and foreign currencies of all financial institutions (including foreign-funded financial institutions, including hereafter) totaled 68.9 trillion yuan, up 18.6 percent year on year, 9.1 percentage points and 3.1 percentage points less than end-2009 and end-Q1 2010 respectively. Outstanding loans increased 7.7 trillion yuan over the beginning of the year, a deceleration of 2.4 trillion yuan year on year. Outstanding RMB deposits registered 67.4 trillion yuan, up 19.0 percent year on year, 9.2 percentage points and 3.1 percentage points less than end-2009 and end-Q1 2010 respectively, and up 7.6 trillion yuan over the beginning of the year, a deceleration of 2.3 trillion yuan year on year. Outstanding foreign currency deposits registered US$212.7 billion, up 2.2 percent year on year and an increase of US$ 4 billion over the beginning of 2010, a deceleration of US$11.3
billion.
Household deposits were stable while the deposits of non-financial enterprises registered a significant decline. The share of demand deposits rose. At end-June, outstanding household deposits at financial institutions totaled 29.2 trillion yuan, up 15.2 percent year on year, an acceleration of 0.1 percentage points and an increase of 2.8 trillion yuan over the beginning of the year, a deceleration of 415.2 billion yuan, which may be partly attributed to diversion to wealth management products and other investment products. Outstanding RMB deposits of non-financial institutions reached 28.1 trillion yuan, up 19.5 percent year on year, a deceleration of 7.1 percentage points over the growth in Q1. They rose 2.9 trillion yuan over the beginning of the year, a major deceleration of 2.7 trillion yuan, which can be partly attributed to last year’s high base. Demand deposits accounted for 45 percent and 52 percent respectively of new household deposits and deposits of non-financial enterprises, up 10 percentage points and 6 percentage points respectively year on year. At end-June, outstanding fiscal deposits registered 3.2 trillion yuan, up 28.9 percent year on year and up 970.7 billion yuan over the beginning of the year, an acceleration of 282.6 billion yuan year on year.
III. Loan growth of financial institutions stabilized
At end-June, outstanding loans in domestic and foreign currencies of all financial institutions reached 47.4 trillion yuan, up 19.2 percent year on year, 13.8 percentage points and 4.9 percentage points lower thanend-2009 and end-Q1 2010 respectively. Outstanding loans grew 4.8 trillion yuan over the beginning of the year, a deceleration of 2.9 trillion yuan year on year. The major share of medium- and long-term loans in domestic and foreign currencies went to the infrastructure sector (transportation, warehousing, and postal services, the production and supply of electricity, gas, and water, and management of water conservation, the environment, and public utilities), the real estate sector, and the manufacturing sector. In the first half of the year, medium- and long-term loans extended by major financial institutions (including the China Development Bank and policy banks, state-owned commercial banks, shareholding commercial banks, postal savings banks, and urban commercial banks) to the three sectors registered 1.03 trillion yuan, 448.8 billion yuan, and 313.3 billion yuan, accounting for 43.4 percent, 18.8 percent, and 13.1 percent respectively in new medium- and long-term loans for all industries. The growth in loans extended to the agricultural sector and the rural areas remained higher than other loans during the same period. At end-June, outstanding loans extended to the rural areas by major financial institutions and rural cooperative financial institutions, urban credit unions, and rural banks and financial companies stood at 8.8 trillion yuan, up 31.3 percent year on year, 12.1 percentage points higher than the average loan growth in other sectors. Outstanding loans to the agricultural, forestry, animal husbandry, and fishery industries totaled 2.2 trillion yuan, up 22.0 percent year on year, 2.8 percentage points higher than the average loan growth in other sectors.
The growth of RMB loans gradually slowed down. At end-June, the growth of RMB loans stood at 18.2 percent, 13.5 percentage points and 3.6 percentage points slower from end-2009 and end-Q1 2010 respectively, and RMB loans totaled 4.6 trillion yuan more than that at the beginning of 2010, 2.7 trillion yuan less compared with the growth during the same period of the previous year. Credit extensions followed a stable trend from month to month. Beginning in February 2010, monthly credit extensions remained at around 650 billion yuan. Credit generally grew in line with the aims of macroeconomic management. Loans extended by Chinese-funded large banksand small- and medium-sized banks operating nationwide and locally grew slower compared with the growth during the same period of the last year. Broken down by sectors, household loans maintained fairly rapid growth whereas growth of non-financial enterprise loans and other sectors declined significantly. At end-June, household loans grew 49.3 percent year on year, up 6.0 percentage points over the end of 2009, 2.2 percentage points slower compared with Q1-2010, and 1.7 trillion yuan more than at the beginning of the year, an acceleration of 682.9 billion yuan year on year. Residential mortgage loans accounted for 50 percent of the total household loans, registering a remarkable increase of 870.3 billion yuan over the beginning of the year. In recent months, however, the growth of residential mortgage loans slowed down as a result of the further implementation of real estate control measures and the marked fall in the volume of real estate transactions. In June 2010, residential mortgage loans only accounted for 33 percent of total household loans. Loans to non-financial enterprises and other sectors rose 11.3 percent year on year, growing 2.9 trillion yuan over the beginning of this year, a deceleration of 3.4 trillion yuan year on year. Among this total, medium- and long-term loans went up 2.7 trillion yuan over the beginning of the year, a deceleration of 426.2 billion yuan. Bill financing dropped 652.4 billion yuan from the beginning of the year, a deceleration of 2.4 trillion yuan, falling only 28.1 billion yuan over end-Q1 2010. Recently, bill issuances remained at a fairly high level, as have the bill discount rate. Bill financing continued to serve as a pool for commercial banks to adjust their asset structures. Credit support for SMEs was reinforced. In the first half of the year, new loans extended by banking institutions to SMEs stood at 1.9 trillion yuan, and by end-June 2010 outstanding bank loans for SMEs had risen 19.2 percent year on year. Among this total, new loans for small enterprises registered 866.8 billion yuan in the first half of the year, and outstanding loans for small enterprises increased 23.9 percent year on year, 7.7 percentage points and 11.4 percentage points more than that for medium and large enterprises respectively.
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