According to the latest statistics from the People’s Bank of China (PBoC), monetary and financial data showed a return to growth in June. At the end of June, the balance of broad money (M2) was RMB 258.15 trillion, a year-on-year increase of 11.4%, and the growth rate was 0.3 and 2.8 percentage points higher than that at the end of last month and the same period of the previous year respectively. Meanwhile, the balance of narrow money (M1) was RMB 67.44 trillion, a year-on-year increase of 5.8%, where the growth rate was 1.2 and 0.3 percentage points higher than the end of last month and the same period of the previous year respectively. The balance of currency (M0) in circulation was RMB 9.6 trillion, a year-on-year increase of 13.8%.
In the first half of the year, the net cash investment was RMB 518.6 billion. At the end of June, the stock of social financing was RMB 334.27 trillion, up 10.8% year-on-year, and the growth rate was 0.3 percentage points higher than that in May, though still lower than the 11% growth rate in the same period last year. The growth rates of the M2, M1 and social financing scales have all shown the tendency of increase simultaneously. Researchers at ANBOUND believe that this reflects that driven by the intensification of macroeconomic policies, the overall financial and economic situations are showing an upward recovery trend.
Figure: Monthly Monetary & Social Financing Growth Rates and Price Level Change (in percentage)
Source: People’s Bank of China & National Bureau of Statistics, chart plotted by ANBOUND
However, in terms of credit growth, which accounts for the main part of social financing and currency, the balance of RMB loans at the end of the month was RMB 206.35 trillion, a rise of 11.2% year-on-year, and the growth rate was 0.2 percentage points higher than that at the end of last month and 1.1 percentage points lower than the same period last year. In June, RMB loans rose by RMB 2.81 trillion, being a year-on-year increase of RMB 686.7 billion. This shows that despite the substantial growth of RMB credit in June and that the overall recovery has been achieved, the upward momentum remains insufficient. Continued support from macro policies will still be needed to enable China’s finance and economy to recover comprehensively. In addition, at the end of June, the balance of RMB deposits was RMB 251.05 trillion, a year-on-year increase of 10.8%, and the growth rate was 0.3 and 1.6 percentage points higher than that at the end of the previous month and the same period of the previous year respectively. In June, RMB deposits increased by RMB 4.83 trillion, a year-on-year increase of RMB 974.1 billion. The rapid growth of deposits is consistent with the previous survey results of the Chinese central bank, indicating that under the continuous impact of the COVID-19 pandemic, the market still lacks confidence in consumption and investment, which affects credit demand to a certain extent.
On the other hand, the stock of social financing at the end of June was RMB 334.27 trillion, a year-on-year increase of 10.8%. Among them, the balance of RMB loans issued to the real economy was RMB 205.09 trillion, a year-on-year increase of 11.1%. The balance of foreign currency loans issued to the real economy was RMB 2.33 trillion, a year-on-year increase of 0.5%. Entrusted loans decreased by 0.5% year-on-year, trust loans fell by 29.6% year-on-year, and undiscounted bank acceptances fell by 19.2% year-on-year. The corporate bond balance was RMB 31.48 trillion, an increase of 10.1% year-on-year. The government bond balance was RMB 57.72 trillion, up 19% year-on-year. The domestic stock balance of non-financial enterprises was RMB 9.96 trillion, a year-on-year increase of 14%.
The cumulative increment of social financing in the first half of 2022 was RMB 21 trillion, which was RMB 3.2 trillion more than the same period last year. Among them, RMB loans issued to the real economy increased by RMB 13.58 trillion, a year-on-year increase of RMB 632.9 billion. Foreign currency loans issued to the real economy increased by RMB 45.8 billion, a year-on-year decrease of RMB 182.3 billion. The entrusted loans decreased by RMB 5.4 billion, which was a year-on-year decrease of RMB 109.1 billion; while trust loans decreased by RMB 375.2 billion, making it a year-on-year decrease of RMB 348.7 billion. Undiscounted bank acceptance bills decreased by RMB 176.8 billion, a year-on-year decrease of RMB 171.4 billion. Corporate bond net financing was RMB 1.95 trillion, a year-on-year increase of RMB 391.3 billion. The net financing of government bonds was RMB 4.65 trillion, an increase of RMB 2.2 trillion year-on-year. Additionally, the stock financing of non-financial enterprises in the country was RMB 502.8 billion, an increase of RMB 7.3 billion year-on-year.
These data changes reflect that the scale of social financing in May and June has increased significantly under the circumstance that monetary policy easing has intensified since the second quarter. The increase in the scale of social financing in June reached RMB 5.17 trillion, an increase of RMB 1.47 trillion year-on-year. The stock of social financing has basically filled the gap left by the sharp decline in social financing in March and April, and the overall social financing has seen a recovery to the long-term trend. In realizing the incremental recovery of the social financing scale, it should be pointed out that government bond financing has played a major role, and its incremental growth has reached RMB 2.2 trillion. In fact, this was essentially driven by the massive issuance of local government bonds in May and June. It has been estimated that in June alone, the incremental scale of government bond financing reached RMB 1.6 trillion, which is a significant continuous increase from RMB 1 trillion in May. This has played a major role in the RMB 3.3 trillion increase in the scale of social financing. Furthermore, the decline in non-standard financings such as entrusted loans, trust loans, and bank drafts is due to the substitution effect brought about by credit easing on the one hand, and this is closely related to the effect of the shrinking real estate market on the other hand. In the first half of the year as a whole, the rise of RMB 13.58 trillion in credit to the real economy, which was an increase of RMB 632.9 billion year-on-year, also means that the central bank’s sustained goal of maintaining credit growth has been achieved.
For the growth rate of the social financing scale to be 10.8%, this would signify that China’s timely adjustment of monetary policy in the first half of the year has a positive effect on stabilizing the country’s finance and on promoting stable growth. This may be the basis for the PBoC to emphasize the return to stabilization policy. As far as the second half of the year is concerned, the scale of social financing is still under great pressure to maintain the growth rate. This is especially true when the peak of local bond issuance has passed and the quota has been exhausted. The issuance of government bonds, which played a supporting and bottom-up role for social growth in the first half of the year, will then see a decline in its effect. This, in turn, will increase the reliance on RMB loans or other direct financings for social financing growth. Promoting the growth of bank loans will remain the main task in the future. In other words, China’s macroeconomic policies such as monetary and fiscal policies still need to provide continuous support for economic recovery through total easing and structural adjustment.
Final analysis conclusion:
In June, the growth rate of monetary and social financing in China showed a simultaneous increase, indicating that the overall financial and economic situations of the country are showing a recovery trend. This, all in all, is driven by the intensification of macroeconomic policies. Nonetheless, under the circumstance of the withdrawal of local government bond issuance, there will still be pressure to maintain the continued growth momentum of monetary and social financing in the future. Hence, the ongoing support from macro policies will become indispensable.
Digital Futures: Driving Systemic Change for Women
Authors: Erin Watson-Lynn and Tengfei Wang*
As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them.
Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.
Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.
Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.
Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.
A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.
In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.
While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.
These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.
*Tengfei Wang, Economic Affairs Officer
This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP
Empowering women-led small businesses in Nepal to go digital
Authors: Louise Anne Sophie Lavaud and Mitch Hsieh*
Throughout the years, Laxmi Shrestha and her husband saw the opportunities that opening an online shop could bring to her family business.
“Looking at the trend of TikTok and other sites, we thought selling online could help us but we weren’t technically sound,” said Laxmi, the owner ofLaxmi Hastakala Store, in Banepa, Nepal, and part of a family of artisans.
As she learned about selling online, she picked up on how to market her shop digitally and, according to Laxmi: “It has surely given our business a push we always wanted. Recently we started selling our products online and we also receive payments online.”
Laxmi Hastakala Store is among the 1,800 women-led micro, small and medium enterprises (MSMEs) in Nepal being trained on digital and financial literacy by Sparrow Pay – one of the winners of the Women Fintech MSME Innovation Fund launched in 2019 by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Capital Development Fund (UNCDF).
Sparrow Pay has created a local digital marketplace where women-led MSMEs can offer products and services to its existing 800,000+ digital payment service users. Additionally, Sparrow Pay is supporting these women entrepreneurs in adopting digital payments and creating a payment history to support access to additional financial services.
MSMEs are a vital source of employment and a significant contributor to a country’s GDP. However, more than 45 per cent of MSMEs in Asia and the Pacific are constrained from accessing finance and other support for their businesses. Socio-cultural norms mean women-led enterprises have to overcome gender-specific barriers to access institutional credit and other financial services.
ESCAP and UNCDF aim to encourage easy access to digital finance for MSMEs in Asia and the Pacific, break the financial barriers surrounding women-led enterprises and support entrepreneur-centric growth and inclusiveness throughout the region. Initiatives by the 10 winning fintech companies are currently supporting more than 9,000 women-led MSMEs in Bangladesh, Cambodia, Fiji, Myanmar, Nepal, Samoa and Viet Nam.
Just like Laxmi, these women business owners plan on successfully growing their companies in the digital area.
The Women Fintech MSME Innovation Fund is part of a regional programme “Catalyzing Women’s Entrepreneurship: Creating a Gender-Responsive Entrepreneurial Ecosystem,” which seeks to support the growth of women entrepreneurs in Asia and the Pacific by enabling a policy environment for such business owners, providing them with access to finance and expanding the use of ICT for entrepreneurship.
*Mitch Hsieh Chief, Communications and Knowledge Management Section
Is It Possible to Lift Sanctions Against Russia? — No
Every conflict sooner or later ends in peace. Such is the conventional wisdom that can often be heard from those who, amid the current situation of the sanctions tsunami and confrontation with the West, are trying to find hope for a return to “normality”. The logic of such wisdom is simple. At some point, the parties will cease fire and sit down at the negotiating table. The end of hostilities will lead to a gradual reduction in sanctions pressure on Russia, and our businesses will be able to return to work with Western partners.
We have to disappoint those who believe in such a prospect. Sanctions against Russia, for the most part, will not be lifted even in the event of a ceasefire in Ukraine and a peace agreement. There will be no return to “pre-February normality”. Instead of remembering a lost past, we will have to focus on creating a new future in which Western sanctions remain a constant variable.
Why is the lifting of Western sanctions on Russia extremely unlikely? There are several reasons.
The first reason is the complexity of the conflict between Ukraine and Russia. It has every chance of being prolonged for a long time. There may be pauses in active hostilities. The parties may conclude temporary truces. However, such truces are unlikely to remove the political contradictions that gave rise to the conflict. Currently, there are no parameters for a political compromise that would suit all parties. Even if an agreement between Moscow and Kiev is reached, its sustainability and feasibility are not guaranteed. The experience of Minsk-2 shows that the mere appearance of agreements does not automatically resolve political problems and does not lead to the lifting or easing of sanctions. The Ukrainian problem can smoulder and flare up again for decades, partly because both sides are limited in the possibilities of a decisive military victory and complete surrender of the enemy. Relations between Russia and Ukraine are at risk of entering the ranks of long-term conflicts, similar to relations between India and Pakistan, or North and South Korea. The complexity and longevity of the conflict guarantee Western sanctions for the long term.
The second reason is the stable nature of the contradictions between Russia and the West. The conflict in Ukraine is part of a larger Euro-Atlantic security palette. An unstable system of asymmetric bipolarity has formed in Europe, in which the security of Russia and NATO can hardly be indivisible. Russia has no way to crush the West without doing unacceptable damage to itself. However, the West, despite its colossal superiority, cannot crush Russia without incurring unacceptable losses. Containing Russia is the best strategy for the West. Ukraine is doomed to remain one of the areas of containment. For Russia, the strategy of asymmetric balancing of Western superiority remains optimal. It is possible that part of such a strategy will be a course towards a radical territorial redistribution of Ukraine, tearing away from it the eastern and southern parts. But in itself, such a redistribution will not remove the problems of Western sanctions.
The third reason is the institutional features of the sanctions policy of the initiating countries. Experience shows that sanctions are relatively easy to impose but very difficult to lift. Thus, with regard to Iran, a whole “web of laws” has formed in the United States, which significantly limits the administration’s ability to lift sanctions. Even if the sanctions are not enshrined in law, their cancellation or mitigation still requires political capital, which not every politician is ready to spend. In the US, such steps will cause criticism or even opposition in Congress, and in the EU – disagreements among member states. Of course, individual restrictions are lifted or relaxed in the interests of the initiating countries themselves. The experience of sanctions pressure on the Republic of Belarus shows the existence of the “sanction remissions” when restrictions are eased. However, the legal mechanisms of sanctions themselves remain and can be used at any time.
The fourth reason is the quick reversibility of the sanctions. Often, their abolition is accompanied by political demands, the implementation of which is a complicated process. For example, the Iranian nuclear deal required several years of complex negotiations and significant technological decisions. However, the return of sanctions can be carried out overnight. There is an asymmetry in the fulfilment of obligations. Fulfilling the requirements of the initiators requires significant changes, while the return of sanctions requires only a political decision. Rapid reversibility breeds distrust among target countries. It is easier for them to continue to live under sanctions than to make extensive concessions and risk receiving new sanctions. Historical experience shows that the initiators of sanctions tend to play the game of “finishing” the opponent. After the concessions come new, more radical political demands and the threat of new sanctions. The “Pompeo 13 Points” – a list of US demands on Iran beyond the limits of fulfilling the terms of the nuclear deal – have already become a textbook example. The Iranian lesson, apparently, was well learned in Moscow. Iran itself is actively working to achieve its goals in the field of nuclear arms. Ultimately, this shows the ineffectiveness of sanctions in terms of influencing the political course of the target country. But questionable effectiveness does not negate the fact that sanctions continue to be applied and enforced.
The fifth reason is the ability to adapt. Without a doubt, Russia will suffer enormous damage from the restrictive measures which have been introduced. However, the possibility of it adapting to the sanctions regime remains high. Russia has the chance, first, to partially make up for the shortfall in supplies from abroad with the help of its own industry, although this will require political will and the concentration of resources. Second, it has access to non-Western markets, as well as alternative sources of goods, services and technology. The key conditions for solving this problem will be the creation of reliable channels for financial transactions that are not related to the US dollar, the Euro, or Western financial institutions. Such a task is feasible both technically and politically, although it will also require time and political will. Iran’s experience shows that sanctions have seriously hit the country’s development opportunities. However, they did not interfere with the development of agriculture, industry and technology. The modernisation of the Soviet Union also proceeded under severe Western sanctions. The ability to adapt reduces the motivation for concessions to the demands of the initiating countries, especially given the risk of playing for “finishing”.
These reasons make the prospect of lifting or significantly reducing sanctions pressure on Russia extremely unlikely. The US, EU and other initiators have already introduced the most severe restrictions on Moscow. But the upward wave of sanctions escalation has not yet been exhausted. In addition, the achievement of the ceiling of the applied measures is unlikely to mean the abolition of those already introduced. However, the sanctions also do not mean the “end of history” of the Russian economy. It found itself in new conditions that will require adaptation and the search for new opportunities for development and growth.
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