21st Century Business Herald:

How does the PBC view the M2 balance surpassing 300 trillion yuan at the end of March? What are the PBC's plans for addressing the issue of funds sitting idle or simply circulating within the financial sector? Regarding inflated balance sheets, what measures will the PBC take to curb this trend?

Zou Lan:

I will answer your questions. The broad money supply (M2) balance has now surpassed 300 trillion yuan, reflecting sustained financial support for the growth of the real economy in recent years. China has experienced prolonged periods of rapid economic growth, resulting in continuously expanding economic size and quickly accumulating enterprises capital and residents assets. These changes have fueled increased demand for money. Corresponding to the stage of economic development, China has sustained a prolonged period of rapid, double-digit growth of monetary and credit supply, fostering an environment conducive to economic development. During the three years of the pandemic in particular, in order to stabilize the overall economy, the financial sector intensified its efforts in counter-cyclical adjustments. Overall, the current stock of money is indeed substantial.

China is currently accelerating its economic restructuring, transformation, and upgrading. There have been significant changes in the supply-demand relationship in the real estate sector, and efforts have been strengthened to prevent and control local government debt risks. The economy continues to go light, with credit demand showing signs of weakening compared to previous years, and the credit structure undergoing optimization and upgrading. However, relevant parties are still going through a process of understanding and adaptation to these changes. Some banks remain fixated on pursuing a scale-driven operating model and internal assessments, exceeding the genuine financing needs of the real economy. Additionally, some enterprises, capitalizing on their advantageous positions, utilize low-cost loans for investment in wealth management products and fixed-term deposits or relend to other enterprises. Consequently, their primary business operations fail to generate profits, and financial activities become their main source of income, resulting in funds sitting idle or simply circulating within the financial sector, thereby reducing fund utilization efficiency. In response, this year's government work report timely proposed measures to "prevent funds from sitting idle or simply circulating within the financial sector."

Relevant departments will strengthen efforts to monitor the phenomenon of funds simply circulating within the financial sector and improve management assessment mechanisms. In the future, as the economy undergoes transformation and upgrading, effective demand recovers and social expectations improve, the phenomenon of funds sitting idle or simply circulating within the financial sector will also be alleviated. The current rapid growth in the total money supply may slow down, leading to some disturbances in the data, making it inappropriate for simple year-on-year comparisons. However, this does not imply a reduction in the intensity of financial support for the real economy. Instead, efficient enterprises in genuine need of funds will receive more financing, reflecting an enhancement in the quality and effectiveness of financial support. Thank you for your questions.