How to view the recent continuous rebound in M1 growth | Chongyang Q&A

Q: How does Chongyang Investment view the recent continuous increase in M1 growth rate?

A: On August 13, the People's Bank of China released financial data for July, indicating that the year-on-year growth rate of M1 in July was 5.6%, which represents a further increase compared to the previous month, continuing the upward trend that has been sustained since the fourth quarter of last year.The continuous rebound in M1 growth is primarily driven by a significant increase in demand deposits from enterprises and households.From the enterprise perspective, after the regulatory authorities halted manual interest supplementation in April last year, there was a rapid outflow of demand deposits from enterprises and institutions, resulting in a very low base during the same period. Starting in May this year, the scale of year-on-year decrease in unit demand deposits significantly declined, turning positive in June, which is also a major reason for the rapid rebound in M1 year-on-year growth starting in May this year. In addition, the fast-paced issuance of government bonds in the first half of this year has gradually transitioned into the expenditure phase, boosting the recovery of unit demand deposits. The issuance scale of special bonds for debt restructuring has exceeded 1.88 trillion yuan to date; this portion of funds will remain as enterprise demand deposits on the accounts of the debt repayment entities until repaid, which promotes the recovery of enterprise demand deposits. Another important reason is that with the weakening of the US dollar index and the strengthening of the renminbi, enterprises' willingness to engage in foreign exchange settlement and sales has significantly increased this year. According to data from the State Administration of Foreign Exchange, the foreign exchange settlement and sales balance in July was USD 22.8 billion, which has rapidly improved compared to the negative balance at the beginning of the year, thereby contributing to the increase in enterprise demand deposits. From the household perspective, as the yields on time deposits, money market funds, and wealth management products continue to decline, there is a demand for asset reallocation in the household sector. This year, the performance of Chinese equities and commodity assets has been remarkable, and the profit effect has driven households to convert time deposits into demand deposits, leading to an increase in household demand deposits. Furthermore, consumption stimulus policies such as subsidies have driven an increase in the total retail sales of consumer goods in the first half of this year, which may have also activated some deposits.The sustainability of the M1 growth rebound largely depends on the endogenous momentum of the economy.This round of M1 growth differs from previous cycles; earlier M1 upward trends were primarily driven by economic activity and fundamental improvements related to the real estate cycle, whereas this round is more about the reallocation of deposit assets by enterprises and households in a low interest rate and low base environment. Looking ahead, the low base effect brought by the cancellation of manual interest supplementation last year will persist until October this year. After that, the growth rate of M1 will depend more on improvements in the economic fundamentals. Current policy support may help stabilize confidence and improve corporate cash flow, but its transmission effect on real investment and consumption willingness remains to be observed. For the capital market, this reallocation behavior implies relatively abundant off-market funds, which is conducive to the improvement of liquidity.

▲ Swipe up to read more【Disclaimer】

This material is original and published by Shanghai Chongyang Investment Management Co., Ltd. (hereinafter referred to as "Chongyang Investment"), and is intended solely for informational and investor education purposes. The information and data this material is based on come from public channels (e.g., Wind, Bloomberg) and internal research results, and the relevant information is considered reliable; however, Chongyang Investment makes no express or implied representations or warranties regarding its completeness or accuracy. The information provided is for reference only and does not constitute an advertisement, sales offer, or advice to trade any securities, funds, or investment products. Any entities, brands, goods, etc. referenced in this material are used solely for research and analytical purposes and do not represent actual operations of Chongyang Investment. Due to various factors such as investment restrictions of fund products, portfolio adjustments, and transaction costs, the actual operations of Chongyang Investment may differ from the conclusions drawn in this material.

This material does not take into account any specific investment needs, investment objectives, or risk tolerance of any reader. Readers should carefully read the product's legal documents and risk disclosures before investing, fully understand the risk-return characteristics and product features, and thoroughly consider their own risk tolerance to make rational judgments and prudent investment decisions.

The copyright of this material belongs to Chongyang Investment. Without authorization from Chongyang Investment, no institution or individual may forward, reproduce, copy, publish, modify, imitate, or quote the contents of this material in any form.

If you are interested in Chongyang products, please feel free to inquire.

The public account has changed its push rules.

our articles may get lost in the vast information flow. Your

oneShare, Like, 'Looking At'，

Let us draw closer together,

to meet in a better way,

pinning us to the top of your listis also a great idea.

Reorient Investment, always with you.

1397 Views