China revised its method for calculating the added value of the financial sector in an attempt to improve the accuracy of gross domestic product statistics in the first quarter of this year—a change cited by many analysts as the proximate cause for April’s contraction in aggregate social financing, the first drop of its kind in almost two decades, reports the South China Morning Post. The correction was also implemented to aid efforts from financial regulators to prevent capital from idling in the financial system and provide more support for the real economy, they argued.
Aggregate financing, which includes bank credit, bonds and stock market funding, shrank by RMB 18.9 billion ($2.6 billion) in April from the previous month. The People’s Bank of China, the country’s central bank, said on Saturday the decline was the first observed since October 2005.
The M1 money supply—which comprises currency in circulation plus some banking deposits—dropped 1.4% in April year on year, the first decline in more than two years.