CNR:

In 2020, the growth of the narrow measure of the money supply (M1) continued to rise, even by double digits in November. What's the reason for that? In 2021, will there be any changes to real estate financial policies? Thanks.

Chen Yulu:

Besides the growth of the broad measure of money supply (M2), people are also concerned about M1. At the same time, the real estate market is also the main concern for us, especially about how to financially stabilize it. The questions go to Ms. Ruan and Mr. Zou.

Ruan Jianhong:

I will answer your question about M1. As of the end of 2020, the M1 increased by 8.6% year on year to 62.56 trillion yuan, 4.2 percentage points higher than the same period in 2019, which is a relatively high growth. The demand deposits account for 90% of M1, which makes up the largest portion. According to the data on demand deposits collected by the PBOC's National Financial Basic Database, there are three major reasons for M1 growth in 2020:

First, China's prudent monetary policies have effectively supported the real economy. With structural policies supporting companies and stabilizing employment, traditional manufacturing and wholesale and retail sectors have received significant financial support. That financial support helped stabilize the cash flow for enterprises and increase their demand deposits. As of the end of last November, China's manufacturing and wholesale and retail sectors saw a year-on-year growth of 16.5%, amounting to 30% of the total demand deposits.

Second, some industries have received more fund support, but because some projects have not been fully implemented, some funds remain idle. From the statistics, industries like public management and business leasing account for a large proportion of the newly increased demand deposits. In these industries, there are some time periods between fundraising and investment, which leads to the temporary slowing of funds.

Third, the regulation of deposit products has promoted the increase in demand deposits. Since October 2019, the financial management administrations have continued to regulate products including structured deposits , and some funds have flowed into agreement deposits.

In the future, with the ease of the epidemic, the recovery of the economy, and the advance and progress of investment projects, capital spending will accelerate and the remaining demand deposits will decrease accordingly. Additionally, as the conversion from structured products into current deposits - due to regulation of deposit products - is reduced, we predict that the increase of M1 will be relatively steady.

Zou Lan:

I will answer the question concerning financial policies in the real estate sector. In recent years, adhering to the principle that the housing is for living in and not for speculation and targets for stabilizing land price, housing prices, and market expectations, the PBOC has implemented long-term mechanisms for the real estate market and intensified the financial management. We have performed our duties in the following aspects.

First, we have enhanced financial regulation in the real estate sector. We have guided the financial administrations to strengthen the monitoring and calculating of all funds flowing into real estate, allowed commercial banks to increase real estate loans at a reasonable speed, and promoted the flow of financial resources into major sectors and weak links such as manufacturing and small and micro enterprises,. Last year, the growth rate of real estate loans was lower than that of other loans for the first time in eight years. The proportion of the newly added real estate loans in all loans fell from 44.8% in 2016 to 28% last year.

Second, we have steadily implemented prudential management for real estate finance. On the one hand, we have carried out long-term mechanisms, implementing tailored housing regulations for different cities and adopting differentiated housing credit policies. On the other hand, we have prioritized rules and transparency and established fund monitoring and financing management rules for major real estate enterprises. Moreover, we have set up and improved a macro prudent management system for real estate finance.

Third, we have improved financial policies for housing rentals. Focusing on both housing purchases and renting, we have accelerated the study of financial policies to support the housing rental market. We will solicit public opinion in the days to come.

Going forward, the Central Bank will implement the deployments of the 5th Plenary Session of the 19th CPC Central Committee and the Central Economic Work Conference, and stick to the principle that "houses are for living in, not for speculation," encourage both housing purchases and rental, continue to implement tailored housing regulations for different cities so as to maintain continuity, consistency, and stability in our policies toward the real estate finance, and steadily implement the prudential management of real estate finance. We will increase financial support for the development of the housing rental market and promote the steady and healthy development of the real estate market. Thank you.