The Communist Party of China Securities Regulatory Commission met on Tuesday to set the focus of capital market work in 2021, calling for enhancing wealth management functions and promoting the conversion of residents’ savings into investment as a boost to expanding domestic demand. An independent Chinese financial commentator said that residents’ savings are being targeted again.
The Communist Party of China Securities Regulatory Commission asked to promote the conversion of residents’ savings into investment to expand domestic demand
According to Caixin and other Chinese media reports on Dec. 23, the CCP’s Securities Regulatory Commission met on Dec. 22 to set the tone for capital market work in 2021, saying that the next step is to focus on strengthening the investment side of the capital market, enhancing wealth management functions, and promoting the transformation of residents’ savings into investment to help expand domestic demand. The meeting on the same day was chaired by Yi Huiman, chairman of the Communist Party of China Securities Regulatory Commission.
According to the front page commentary of the Securities Daily, the official media of the Communist Party of China on December 22, residents’ savings will be one of the most important forces supporting the capital market, and only three steps are needed to put the “elephant” of residents’ savings into the refrigerator.
First, the capital market should “reason” to the savings funds; second, the capital market should “move” to the savings; third, the capital market should “lure to the savings”.
The reason why the official media refers to residents’ deposits as “elephants” is that, according to the Communist Party’s central bank report, China’s household deposit balance was 82.14 trillion yuan in 2019.
The International Finance Daily reported on Dec. 23 that $82.14 trillion is not a small amount, and if 1 percent of the residents’ savings are converted to investment, especially into the capital market, this will undoubtedly have a very positive impact on the Shanghai and Shenzhen stock markets.
Comment: Residents’ savings are targeted again
In response to the policy signal of the Communist Party’s Securities Regulatory Commission to promote residents’ savings to enter the capital market, Chinese independent financial commentator “Jingban” wrote an article with the title “Residents’ savings are targeted again” on Dec. 23, saying that China’s domestic demand, stock market, real estate and investment, I wonder how many other burning eyes are focused on residents’ savings?
The column writes that people generally will not spend all the money income they get, but will save part of it, either for future living expenses, or for protection against unexpected risks, or for earning interest, etc. This is savings.
According to the column, the future life security is low, you have to save more money; sudden risk security is low, you have to save more money; investment channels are not developed, you have no other investment channels, you can only save more money. Therefore, the savings rate in China is naturally higher.
However, China’s current universal home buying frenzy leverage, over-consumption has become popular, 500 million people have no savings, 600 million people earn less than a thousand a month, the high savings rate of the statement makes people feel doubtful.
The column points out that data show that China’s savings rate has been declining year by year since 2008, but the rate of decline is not large, China is still one of the few countries with a high savings rate, which seems to be not quite consistent with the wave of Chinese home buying, the reason is that the liabilities of Chinese residents exist in bank accounts, it is also the residents’ savings.
According to the analysis of the column, after 2008, due to the real estate leverage, the speed of China’s residents’ debt suddenly soared, one person’s expenditure is another person’s income, and one person’s debt is also another person’s savings. Obviously, resident savings are inflated by debt, which affects the higher savings rate. With $91.25 trillion in deposits in the residential sector in the third quarter of 2020, but $61.44 trillion in debt, net household savings have been inflated three times.
According to the column, over the past decade, China’s residents have bought houses to push up their debts, decorating the data on residents’ savings rate and causing the data to be fat, while once the credit contraction phase is entered, the contraction of debts will simultaneously drive down savings and the data on residents’ savings will dive.
The column quoted the news of the special meeting of the CPC Securities Regulatory Commission on December 22, saying that efforts should be made to strengthen the construction of the investment side of the capital market, enhance the function of wealth management, promote the transformation of residents’ savings into investment, and help expand domestic demand.
The point here, according to the column, is that the money saved by the residents has not been invested and has been idle in the bank? Obviously the money does not sit idle in the bank, but by the bank to lend out, was used for various investments. Residents’ savings have long been transformed into investments. In other words, whether or not the Securities and Exchange Commission issued a document to promote the transformation of residents’ savings into investment, residents’ savings have long been converted into investment.
Then why does the Securities and Futures Commission issue a document to promote the transformation of residents’ savings into investment?
In this regard, by the column did not give the answer, only said: “you Pin, you fine Pin!”
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