Core Viewpoint - The People's Bank of China (PBOC) has indicated a significant change in the structure of financing in its third-quarter monetary policy report, which is crucial for understanding the dynamics of the housing market and investment strategies. Group 1: Financing Structure Changes - The financing structure in China is shifting from primarily loan-based financing to direct financing through bonds, with loans now accounting for less than 50% of new financing in the third quarter of 2023 [9][14]. - This change implies that the traditional view of using M2 growth as an indicator for housing prices is no longer valid, as the increase in M2 may not correlate with housing market dynamics [13][14]. Group 2: Implications for Housing Market - The report emphasizes that the increase in M2 is largely driven by bond issuance, which does not directly contribute to housing market liquidity, leading to a potential scenario where M2 can grow while housing prices decline [14][18]. - The only reliable indicator for predicting housing market trends remains the growth in household loans, as these directly translate into purchasing power for the housing market [15][18]. Group 3: Economic and Stock Market Analysis - For broader economic and stock market analysis, the focus should be on social financing (社融) and M2, as these metrics provide a comprehensive view of the financial landscape [11]. - The report suggests that the shift towards direct financing will primarily affect economic indicators and stock market performance, rather than the housing market [18].

Economic Development - The core argument suggests that China's economic growth targets should not be based solely on estimates of "potential economic growth rates" due to considerable uncertainty in these estimates [4][5][6] - The estimation of China's potential economic growth rate varies widely among scholars, ranging from 5% to 8%, and there is a lack of official estimates from authoritative government bodies [5][6] - The article emphasizes the importance of using a trial-and-error approach in setting economic growth targets, advocating for expansionary fiscal policies when indicators such as inflation and employment are low [7] - Long-term factors influencing economic performance should not be used to explain short-term economic changes, as many intermediate factors affect current economic growth [8][9] - Macroeconomic regulation and structural reform are not mutually exclusive; both are necessary to address complex economic issues [10][11] - The article discusses the significance of the "Four Trillion Yuan Stimulus Plan" and its long-term effects on China's economic growth and financial stability [17][18] - It highlights the relationship between monetary policy and real estate regulation, noting that fluctuations in monetary policy often correlate with changes in housing prices [29][31] - The article critiques the belief that inflation is always a monetary phenomenon, presenting evidence of instances where inflation rates did not align with monetary supply growth [22][23][24] - It concludes that the lessons learned from over 20 years of macroeconomic regulation in China emphasize the importance of maintaining growth as a fundamental objective [33]

Core Insights - The central bank reported that as of the end of April, the broad money supply (M2) reached 325.17 trillion yuan, reflecting a year-on-year growth of 8% [1] - Experts suggest that analyzing financial data in conjunction with GDP and other economic indicators can provide a clearer picture of the effectiveness of monetary policy [1] - The M2 to GDP ratio has increased from 197% at the end of 2019 to 232% by the end of 2024, marking a 35 percentage point rise over five years [1] - The use of M2 growth rate as an observational indicator for monetary policy is deemed reasonable, as the correlation between money supply and economic growth is weakening [1] Financial Data Analysis - The broad money supply (M2) stood at 325.17 trillion yuan as of April, with an 8% increase year-on-year [1] - The M2 to GDP ratio has risen significantly, indicating a growing divergence between monetary supply and economic output [1] - The trend of diminishing correlation between total money supply and economic growth is noted, aligning with patterns observed in major developed economies [1]