REVIEW OF FINANCIAL PERFORMANCE IN SEPTEMBER 2004

REVIEW OF FINANCIAL PERFORMANCE IN SEPTEMBER 2004

Money supply grew moderately

At the end of September, broad money (M2) stood at RMB24.38 trillion yuan, increasing year-on-year by 13.9 percent, down by 6.8 percentage points from a year earlier, but up 0.3 percentage points over the end of August. Narrow money (M1) reached RMB9.04 trillion yuan, increasing by 13.7 percent, 6.3 percentage points lower from a year earlier, or down by 1.4 percentage points from the end of August. Cash in circulation (M0) was RMB2.05 trillion yuan. The net cash injection in September totaled RMB100.6 billion yuan, up 30.7 billion yuan year-on-year.

The net injection of base money was 156.7 billion yuan, while the money multiplier changed steadily

At the end of September, the balance of base money reached 5.32 trillion yuan, up 14.4 percent year-on-year, 1.5 percentage points lower than the month before. M2 multiplier was 4.59, down 0.06 from the previous month while similar to that of the same period last year.

Credit growth decelerated and incremental short-term loans expanded markedly

At the end of September, outstanding loans denominated in both domestic and foreign currencies in all financial institutions reached RMB18.46 trillion yuan, a year-on-year increase of 13.7 percent, with the growth down 10 percentage points year-on-year and up 0.8 percentage points month-on-month.

RMB loans increased by 13.6 percent year-on-year to 17.3 trillion yuan, 9.9 percentage points lower from a year earlier, or down 0.5 percentage points from the end of August. Adjusted for seasonal factors, the annualized month-on-month rise was 20.8 percent, 13.6 percentage points higher than the previous month.

The increase in loans in September was RMB250.2 billion yuan, RMB45.5 billion less year-on-year. New RMB loans in the first nine months of 2004 totaled 1.7939 trillion yuan, RMB669.7 billion yuan less than that during the same period of 2003.

Generally, loan growth resumes a distinct upward trend. In terms of loan structure, short-term loans increased by RMB114.8 billion yuan in September, up by RMB30.5 billion yuan year-on-year, a record rise since April of this year; medium and long-term loans increased by RMB125.9 billion yuan this month, down by RMB49.9 billion yuan year-on-year.

The balance of foreign currency loans in all financial institutions rose by 15.8 percent year-on-year to USD134.6 billion. The accumulated increase of foreign currency loans in the first nine months of 2004 amounts to US$15.8 billion, US$8 billion less year-on-year. In September alone, FX loans increased by US$200 million, US$4.6 billion less than the same period of last year.

Rise of deposits leveled off and the increase in savings deposits continued to ease

Outstanding deposits denominated in both domestic and foreign currencies in all financial institutions reached RMB24.79 trillion yuan at the end of September, increasing by 15.2 percent year-on-year, down 5.9 percentage points year-on-year. Household savings deposits in both domestic and foreign currencies stood at 12.24 trillion yuan, up 13.2 percent year-on-year, a rise 5.1 percentage points lower than the year before. Corporate deposits in both RMB and foreign currencies had a balance of 8.52 trillion yuan, up 14.8 percent year-on-year, a rise 7.1 percentage points lower than the same period of last year.

RMB deposits grew by 15.8 percent to 23.5 trillion yuan. Adjusted for seasonal factors, the annualized month-on-month rise was 5 percent, 7.5 percentage points lower than that at August. RMB savings deposits registered a balance of 11.5 trillion yuan, up 14.4 percent, and 5.5 percentage points lower than the same period of last year. The rise had been leveling off for eight consecutive months. At present, the rise of RMB savings deposits is at its lowest since April 2004.

At end-September, foreign currencies deposits stood at US$155.9 billion, US$990 million more than the previous month, or up US$2.43 billion from the previous year.

RMB was actively traded on the interbank market, with basically stable interest rates

In September, the national interbank market traded 1.2 trillion yuan, up by 186.5 billion yuan month-on-month, 521.5 billion yuan less than the same period of last year. The average daily turnover in September was 56.2 billion yuan, up 17.8 percent month-on-month, yet down 23.3 percent year-on-year. The monthly weighted average interest rate was 2.3 percent in the interbank lending market this month, 0.4 percentage points lower month-on-month; the monthly weighted average interest rate for bond repo was 2.2 percent, 0.1 percentage points lower than August, showing a slight drop in interest rates.