No sharp turns in economic policy expected

Data from the People's Bank of China, the central bank, shows that the stock of social financing was 291 trillion yuan ($44.8 trillion) at the end of February, 13.3 percent higher than that of last year. The remaining sum of loans is about 183 trillion yuan, 12.6 percent higher than that of last year.

Both data far exceed market expectations.

Some analysts believe that has much to do with the low basis of 2020 and the fact that many enterprises continued working during this year's Spring Festival holiday as the policy encouraged people to stay where they were. Besides, the accelerated economic recovery caused many enterprises to predict the prices of raw materials would rise, so they bought and stored materials.

The higher-than-expected data from January to February may also be related to the impact of real estate regulation. Because the regulatory authorities set an upper limit on the proportion of bank real estate loans, it prompted buyers who just need homes to scramble for mortgages.

This year's Government Work Report said the stable monetary policy will be more accurate and better serve the real economy, so as to help economic recovery and avoid risks. The growth rate of the money supply generally matched the growth rate of social financing and economic growth, with liquidity being rational and the macro-leverage rate being stable.

That means credit might shrink. The M2 rate for 2020 is 10.1 percent, much higher than the nominal GDP growth rate of 2.3 percent, which is a special arrangement due to the COVID-19 epidemic. This year, with the GDP growth target being 6 percent, the M2 rate might be over 6 percent but not exceeding 10 percent. That's lower than that of 2020, which might in turn cause credit to shrink.

What this all means is that the high growth rate of social financing and credit will not last long, because the reasons that resulted in it are mostly special arrangements due to the COVID-19 epidemic. The policies will change as everything returns to normal. Of course, the changes won't be too abrupt, and the general economic policies will be stable, which will guide market expectations to be stable too.