Lending volume shrank considerably while the lending rate experienced ups and downs
In 2004, 8,108 deals of credit lending were concluded, with a turnover of 1.456 trillion yuan and a daily average of 5.776 billion yuan, down 39.88 percent year-on-year. In the first quarter, the excess of supply over demand gradually dragged down the lending rate. In the second quarter, the lending rate rebounded to its highest point amidst the government's macro-control efforts. In the second half of the year, due to the excess supply of market capital over demand, the lending rate declined steadily and returned to its March levels at the end of the year. The yearly high and low of the weighted rate was 2.40 and 2.07 percent respectively.

Compared with 2003, seven of the eight tracked varieties of credit lending rose while one declined. Among them, maturities above 1-month all increased; the 3-month and 2-month led the gainers with a rise of 19.77 percent and 16.58 percent respectively. Turnover shrank for all eight varieties. Among them, the 1-day, 14-day and 1-month took the biggest tumbles, down 56.03 percent, 69.33 percent and 42.86 percent respectively. Repo turnover experienced mixed fortunes and interest rates declined steadily.

In 2004, 39,105 repo deals were concluded on the interbank market, with a trading value of 9.310 trillion yuan. The average daily trading value stood at 36.946 billion yuan, down 20.88 percent from 2003. Similar to the lending rate, the repo rate fell before rising in the first half of the year and declined steadily in the second half of the year. It closed the year at a historical low of 1.88 percent. The yearly high and low of the weighted rate were 2.43 percent and 1.88 percent respectively, registering a range of 55 bps.

Compared with 2003, all short terms under 14-day shrank in both rate and turnover. Among them, the 1-day was the biggest loser with a loss of 10.87 percent. The turnover of the 7-day slumped by 25.89 percent. Maturities over one month were more active. Among them, the turnover of the 4-month enjoyed a rapid year-on-year growth of 62.74 percent.

Outright repo turnover gradually increased and the interest rate declined
Since the launch of outright repo in May 2004, 911 deals have been sealed on the interbank market with a trading value of 126.265 billion yuan. The movements of the outright repo rate and the repo rate basically kept in line with each other. The high and low of the weighted rate were 2.58 percent and 2.12 percent respectively this year, with a range of 46 bps. In terms of turnover, among the seven varieties, short terms remained the most popular modes of transaction. The 7-day was the most active, accounting for 65.65 percent of the total turnover and the 14-day ranked second with its trading accounting for 12.82 percent of the grand total.

Short-term bonds were active and composite bond index fluctuated and rose
In 2004, the cash bond market sealed 21,972 deals valued at 2.504 trillion yuan with an average daily volume of 9.977 billion yuan, losing 19.15 percent year-on-year. Trading was still focused on short terms, in particular, maturities under one year, whose trading accounted for 45.84 percent of all transactions. While short term yields continued to decrease, the composite bond index still rose. The monthly high and low were 1,175.96 and 1,150.61, with a range of 25 points.

In 2004, 292 bonds were traded in the interbank market, including 60 T-bonds, 103 financial bonds, 122 central bank papers, four corporate bonds and three subordinated bonds of banks. Compared with the previous year, the turnovers of all the other bonds decreased to different extents, except that of central bank papers which increased significantly.
Institutional financing.

In 2004, there were few changes in institutional financing. Capital still flowed from state-owned commercial banks and joint stock banks to other institutions. Compared with 2003, borrowing and lending scales in many institutions shrank to different degrees, due to the excess supply of capital over demand. In terms of borrowing, joint stock banks led the losers with a loss of 43.01 percent year-on-year. On the lending side, insurance companies witnessed the biggest decrease with a loss of 61.8 percent year-on-year. Securities companies also cut their financing significantly. One thing worth noting was that funds companies and foreign-funded financial institutions expanded their borrowing by over six times and three times year-on-year and their lending increased by over four times and 2.5 times, respectively.