Yesterday, data released by the central bank showed that RMB loans increased by 644.5 billion yuan in February, halving from January's 1.32 trillion yuan and slightly below expectations; at the end of February, the broad money (M2) balance grew 13.3% year on year, in line with expectations. Experts said the main reason new loans fell short of expectations in February was the Spring Festival factor.

 

　　Three special factors caused the decline

 

　　Zhao Xijun, vice dean of the School of Finance at Renmin University of China, said that from the market's own perspective, January saw a relatively large increase, and February included the Spring Festival holiday, when corporate production activity was relatively weak. At the same time, under credit management, January's increment was large, so February may see adjustments.

 

　　Zhao Xijun believes there are special circumstances this year: on the one hand, competition for deposits has put great pressure on banks' sources of deposits, which may lead to a decline in future loans. On the other hand, with this year's structural adjustment, banks will control projects in industries with overcapacity; these projects have raised banks' non-performing loans somewhat, which will make banks more prudent in selecting loan projects. Third, this year local platforms will be assessed more strictly, making such loan projects more cautious.

 

　　Deposits fell 833.9 billion yuan in the first two months

 

　　On deposits, new RMB deposits in February 2014 were 1.99 trillion yuan, 1.22 trillion yuan more than the same period last year. Xu Bo, a researcher at the Bank of Communications Financial Research Center, believes the main reason for the sharp rebound in deposits in February was that the end of January coincided with the Spring Festival holiday, when large amounts of deposits were placed in time deposits or wealth management products, causing a sharp drop in point-in-time deposits at the end of January, while large amounts of funds returned to deposit form after the holiday (in February). But in fact, looking at the cumulative change in January and February, new deposits in the first two months were still down sharply by 833.9 billion yuan from the same period last year. Xu Bo analyzed that after comprehensively considering the deposit situation in January and February, it is not hard to find that the holiday effect (companies concentrated on paying bonuses to employees before the holiday, and short-term wealth management by companies and individuals) cannot fully explain the obvious decline in deposits; interest rate liberalization and financial innovation are important reasons for the decline in deposits.

 

　　Xu Bo said that one passive factor behind February's overall loans being slightly less than expected was the sharp reduction in deposits.

 

　　Little possibility of a short-term reserve requirement ratio cut

 

　　On the future direction of monetary policy, Du Zheng, a macro analyst at Guokai Securities, pointed out that the possibility and magnitude of fine-tuning and pre-adjustment of monetary policy will increase, and some unconventional means will be used to support the real economy, especially small and medium-sized enterprises; the possibility of a short-term reserve requirement ratio cut is relatively small.