REVIEW OF FINANCIAL PERFORMANCE IN OCTOBER 2004

REVIEW OF FINANCIAL PERFORMANCE IN OCTOBER 2004

The rise in M2 leveled off

At the end of October, broad money (M2) stood at RMB24.37 trillion yuan, increasing by 13.5 percent year-on-year, 7.5 percentage points lower from a year earlier and 0.4 percentage points lower from the end of September. Narrow money (M1) reached RMB9.08 trillion yuan, increasing by 12.57 percent, 7.05 percentage points lower from a year earlier, or down by 1.13 percentage points from the end of September. Cash in circulation (M0) was RMB2.01 trillion yuan. The net cash withdrawal in October totaled RMB44.6 billion yuan, 39 billion yuan more than recorded for the same period of 2003.

Net withdrawal of base money was 48.3 billion yuan, while the money multiplier was basically stable

Base money was 48.3 billion yuan less than in September. At the end of October, base money had a balance of 5.27 trillion yuan, up 10.34 percent year-on-year, 4.09 percentage points lower than at the end of September. The M2 multiplier was 4.63, up 0.04 percentage points from the previous month, but about the same as the corresponding period last year. The excessive reserve ratio for all financial institutions was 3.57 percent, 0.07 percentage points lower than September.

Credit growth decelerated and newly added RMB loans totaled 25.6 billion yuan in October, down 33.1 billion yuan year-on-year

At the end of October, outstanding loans denominated in both local and foreign currencies in all financial institutions reached RMB18.48 trillion yuan, a year-on-year increase of 13.3 percent, 10.3 percentage points less than the rise last year, or 0.4 percentage points month-on-month.

Renminbi loans increased by 13.3 percent year-on-year to 17.37 trillion yuan, 10 percentage points lower than a year earlier, or down 0.3 percentage points from the end of September. Generally, loan growth has leveled off steadily.

In terms of loan structure, short-term loans decreased month-on-month by RMB 23.2 billion yuan in October, exceeding the decline for the same period of last year by 65.4 billion yuan. Paper financing slipped by 30.9 billion yuan, a drop 22.4 billion yuan less than the figure for the same period last year. Medium and long-term loans increased by RMB 83.9 billion yuan this month, roughly equal with the same period of last year.

The balance of foreign currency loans in all financial institutions rose by 13.2 percent year-on-year to USD133.3 billion, a rise 2.6 percentage points lower than the previous month.

Rise of deposits accelerated by 4.9 billion yuan year-on-year, the first increase since February 2004

Outstanding deposits denominated in both local and foreign currencies in all financial institutions reached RMB24.96 trillion yuan at the end of October, representing a year-on-year increase of 15.3 percent, up 1 percentage point from last month, yet down 5.9 percentage points year-on-year.

Renminbi deposits grew by 15.9 percent year-on-year to 23.6 trillion yuan at the end of October, up 0.1 percentage points from September.

There was 145.3 billion yuan in newly added deposits in October, up 25.4 billion yuan year-on-year. Corporate deposits declined by 30.7 billion yuan, 39.8 billion less than the rise for the same period of last year, affected by decreasing derived deposits from the declining loan growth. Deposits from the Treasury and the governmental departments totaled 109.8 billion yuan, up 61.7 billion yuan year-on-year.

RMB savings deposits stood at 11.6 trillion yuan at the end of October, up 14.4 percent year-on-year, a rise similar to that in September, yet 5.2 percentage points lower from the previous year; the annualized month-on-month rise was 15.1 percent, showing an upward trend. Although the year-on-year increase in household savings deposits was still weaker than the same period last year, they increased by 54.2 billion yuan in the month, bettering last year's figure by 4.9 billion yuan. It has been the first time since February this year for newly added savings deposits to surpass last year's numbers. The benchmark interest rate lift by the People's Bank of China contributed to a slightly rising trend in the household savings deposits. FX deposits closed the month with a total of US$158.4 billion, bettering the previous month by US$2.48 billion, a rise of US$430 million more than the same period of last year.

Turnover in the interbank market shrank noticeably amid basically stable interest rates in the market

In October, the national interbank RMB market traded 877.7 billion yuan, 358.8 billion yuan weaker than September, and 462.2 billion yuan less than the same period last year. The average daily turnover in October was 48.8 billion yuan, down 13.2 percent month-on-month and 34.5 percent year-on-year. The monthly weighted average interest rate was 2.24 percent in the interbank lending market this month, 0.06 percentage points lower than the previous month; the monthly weighted average interest rate for bond repo was 2.16 percent, 0.04 percentage points lower than September. Market interest rates remained basically stable.