Core Viewpoint - The fluctuation in resident deposits cannot adequately explain the stock market's rise and fall, as the key to stock market movements lies more with non-bank financial institutions rather than changes in resident deposits [2][3][4]. Group 1: Resident Deposit Changes and Stock Market - Since 2009, July has consistently shown negative growth in resident deposits, indicating seasonal factors rather than significant economic implications [3]. - Historical data shows that in 11 out of 17 years since 2009, the stock market rose in July, despite significant drops in resident deposits in some years [3]. - The relationship between resident deposit changes and stock market performance appears weak, as evidenced by contrasting outcomes in various years despite similar deposit declines [4]. Group 2: Non-Bank Financial Institutions - Changes in deposits from non-bank financial institutions are more reliable indicators of stock market performance, with significant increases in their deposits correlating with stock market gains [5]. - In July 2023, non-bank financial institutions saw an increase of 2.14 trillion yuan in deposits, which was a substantial year-on-year increase [5]. - A strong positive correlation exists between the changes in non-bank financial institution deposits and stock market performance, suggesting that as these deposits increase, the stock market tends to rise [6]. Group 3: Resident Sector Leverage - The trend of residents saving more and borrowing less continues, indicating a de-leveraging process within the resident sector [8]. - As of Q2 2023, the leverage ratio for the resident sector was 61.1%, a slight decrease from the previous year, reflecting ongoing de-leveraging efforts [8]. - Historical data shows that the resident sector has undergone multiple rounds of de-leveraging, with the current trend being the most recent in a series of adjustments since 2004 [12]. Group 4: Economic Context and Policy Implications - The current economic environment, characterized by high leverage ratios and a focus on de-leveraging, suggests that expectations for a quick reversal in this trend may be unrealistic [15]. - The government may need to increase leverage to stabilize and stimulate demand, especially in light of the challenges faced by the resident sector [16]. - The historical context of leverage changes in response to economic crises indicates that government intervention is crucial for maintaining macroeconomic stability [16].

Core Insights - The fluctuations in the stock market are more influenced by non-bank financial institutions rather than changes in household deposits, indicating a continued trend of excess savings among Chinese residents [1][2][4] - The monthly data volatility does not alter the ongoing trend of household deleveraging, as evidenced by the widening loan-to-deposit gap [1][4] Summary by Sections Household Deposits - In July, household deposits in RMB decreased by 1.11 trillion yuan, which is 780 billion yuan more than the same month last year, reflecting seasonal factors rather than a significant trend [2][3] - Since 2009, July has consistently shown negative growth in household deposits, with 11 out of 14 years seeing stock market gains during this month [2] Household Loans - For the first time since 2009, household loans decreased in July, dropping by 489.3 billion yuan, which is significantly lower than the average for the same period from 2020 to 2024 [3][4] - The trend of "more savings, less borrowing" is evident, with household loans increasing by only 680.8 billion yuan in the first seven months of the year, a decrease of 579.4 billion yuan year-on-year [4] Non-Bank Financial Institutions - The increase in deposits at non-bank financial institutions is a more reliable indicator of stock market movements, with a notable increase of 2.14 trillion yuan in July, which is 1.39 trillion yuan more than the previous year [4][5] - The correlation between changes in non-bank financial institution deposits and stock market performance is moderate to strong, suggesting that as these deposits increase, the stock market tends to rise [5][6] Deleveraging Trends - The household leverage ratio has slightly decreased, with the ratio at 61.1% as of the second quarter, down from 62.3% in the previous year [7][11] - The ongoing trend of household deleveraging reflects a broader economic context where the leverage ratio of the entire economy has been rising, with households contributing less to this increase compared to other sectors [10][11] Economic Context - The current economic environment shows that despite the increase in household savings, there is a lack of willingness to invest in riskier assets, indicating potential for future diversification in asset allocation [6][16] - The government may need to increase leverage to stabilize and stimulate demand, as current household debt levels and consumption capabilities are insufficient [16]