The latest financial data released by the People’s Bank of China show that broad money (M2) outstanding grew 7.2% year over year in September, below market expectations of 7.4% and down further from 7.5% the previous month. Meanwhile, narrow money (M1) growth plunged to 3.2% from 4.1%, while the growth rate of currency in circulation (M0) also eased from 11.2% to 10.6%.
This broad-based decline in money supply reflects a significant weakening in the momentum of credit expansion. The sharp slowdown in M1 growth in particular highlights a lack of funds accumulating in corporate demand deposits and subdued circulation of funds within the real economy. Although markets had previously hoped that policy easing would drive a recovery, the actual transmission of credit is clearly encountering bottlenecks, while effective financing demand remains under pressure.
At the macro-financial level, liquidity growth falling short of expectations will increase pressure on the central bank to cut the reserve requirement ratio and interest rates. Yields in the domestic bond market may fall further, while the renminbi will face sustained fundamental pressure. Cautious sentiment in global markets about a recovery in demand among major Asian economies may also intensify, indirectly weighing on commodities.
For crypto asset markets, slower growth in traditional fiat liquidity means that the outflow of incremental capital from Eastern markets is constrained. With risk appetite under pressure, major assets such as $BTC are unlikely to receive a strong near-term boost from the macro credit cycle. Investors should be alert to correction risks arising from diverging liquidity conditions.
#PBOC #ChinaEconomy #Liquidity
This broad-based decline in money supply reflects a significant weakening in the momentum of credit expansion. The sharp slowdown in M1 growth in particular highlights a lack of funds accumulating in corporate demand deposits and subdued circulation of funds within the real economy. Although markets had previously hoped that policy easing would drive a recovery, the actual transmission of credit is clearly encountering bottlenecks, while effective financing demand remains under pressure.
At the macro-financial level, liquidity growth falling short of expectations will increase pressure on the central bank to cut the reserve requirement ratio and interest rates. Yields in the domestic bond market may fall further, while the renminbi will face sustained fundamental pressure. Cautious sentiment in global markets about a recovery in demand among major Asian economies may also intensify, indirectly weighing on commodities.
For crypto asset markets, slower growth in traditional fiat liquidity means that the outflow of incremental capital from Eastern markets is constrained. With risk appetite under pressure, major assets such as $BTC are unlikely to receive a strong near-term boost from the macro credit cycle. Investors should be alert to correction risks arising from diverging liquidity conditions.
#PBOC #ChinaEconomy #Liquidity