The Chinese central bank has seen its total assets contract by over one trillion yuan in the month of February.
According to the latest balance sheet data released by the People’s Bank of China (PBOC) its total assets stood at 36.1 trillion yuan at the end of February, for a contraction of 1.2 trillion yuan compared to the end of January.
PBOC said that the chief reasons for the contraction in its balance sheet in February was a slide in “creditor’s rights for other depository companies” (对其他存款性公司债权), which fell by 1.2 trillion yuan that month.
“Creditor’s rights for other depository companies” refers to monetary policy tools used by PBOC to expand the base money supply via commercial banks, including medium-term lending facilities, pledged supplementary lending, reverse repos, targeted medium-term lending facilities, re-loans and re-discounts.
According to analysts the large-scale contraction was the result of a reduction in demand for credit due to the coronavirus outbreak.
“In February the simultaneous decline of the central bank’s ‘creditor’s rights for other depository companies’ on the asset aside and ‘base money’ on the liabilities side is due to the same internal logic – inadequate credit demand from the real economy” said Wu Chaoming (伍超明), chief economist with Chasing Securities.
“Following the containment of the virus in March, demand in the real economy is recovering, and the central bank is also expanding the extension of medium-term lending facilities and pledged supplementary lending, and the scope of its balance sheet will also increase.”
Official data also points to a record high in the money multiplier at the end of February, with a reading of 6.58.