The overall financial landscape remains stable, effectively supporting the real economy.
According to the People’s Bank of China (PBOC), data released yesterday shows that in the first three quarters of the year, China’s social financing scale and loan growth rates have maintained overall stability, providing robust support for the real economy’s recovery. By the end of September, the balance of broad money (M2) reached 309.48 trillion yuan, reflecting a year-on-year increase of 6.8%, which is a 0.5 percentage point rise from the end of the previous month. The net cash injection in the first three quarters was 838.6 billion yuan.
Deng Ximiao, Chief Researcher at Zhongan Alliance, remarked that the stable rebound in M2 growth is the result of multiple factors. The recent implementation of a series of incremental policies has significantly boosted market confidence, especially as funds from wealth management products have flowed back into deposits, supporting the overall growth of the money supply. Looking ahead, he anticipates that the effects of these policies will become even more pronounced, contributing to continued stable growth in financial volumes.
In terms of financing, by the end of September, the stock of social financing in China stood at 402.19 trillion yuan, with the balance of RMB loans extended to the real economy at 250.87 trillion yuan, marking a year-on-year increase of 7.8%. RMB loans grew by 8.1% year-on-year as of the end of September.
Wen Bin, Chief Economist at Minsheng Bank, noted that despite the weak effective demand for financing, financial data adjustments, and structural economic transformations, the growth rates of social financing and loans continue to exceed the nominal GDP growth rates seen in the first half of the year, remaining within a reasonable range. This indicates that the financial sector is effectively meeting the funding needs of the real economy, significantly supporting its recovery.
There is continued optimization of credit structure, with financing costs on the decline. Data demonstrates that since the beginning of the year, China has made strides in optimizing its credit structure, with a further decrease in enterprise financing costs. By the end of September, inclusive micro loans grew by 14.5% year-on-year, while medium to long-term loans for high-tech manufacturing rose by 12%, and loans for specialized, refined, unique enterprises increased by 13.5%, all outpacing the overall loan growth rate.
Deng Ximiao pointed out that as China undergoes economic structural transformation, the overall demand for credit in traditional sectors such as real estate and local financing platforms has contracted, while new growth drivers in green development and technological innovation are accelerating. This has led to continuous improvement in the credit structure, enhancing support for major strategic initiatives, key sectors, and vulnerable areas.
The average weighted interest rate on newly issued corporate loans in September was 3.63%, down 21 basis points from the same period last year, while new personal housing loans stood at 3.32%, reflecting a reduction of 78 basis points year-on-year, both rates being at historic lows.
Recently, to support economic recovery, the PBOC has introduced a series of incremental monetary policies, including reductions in the reserve requirement ratio and policy interest rates, adjustments to existing mortgage rates, and the establishment of structural monetary policy tools aimed at stabilizing the stock market. Experts assert that the acceleration of these monetary policy implementations this year aligns with immediate needs and has bolstered market confidence.
In terms of reserve requirement reductions, the PBOC cut the rate by 0.5 percentage points in February and another 0.5 percentage points in September, with the possibility of an additional reduction of 0.25 to 0.5 percentage points later this year. In terms of interest rates, a 0.25 percentage point cut in the re-lending and re-discount rate occurred in January, followed by a 0.2 percentage point reduction in September, bringing the policy rate down to a historical low of 1.5%. The loan market quotation rates (LPR) for one-year and five-year terms have fallen by 0.1 and 0.35 percentage points, respectively.
These measures, as explained by experts, strongly support the stabilization and recovery of the real economy, underscoring the PBOC’s commitment to a supportive monetary policy stance.
Wen Bin highlighted that this reflects an increase in monetary policy support for the real economy. Against the backdrop of slowing domestic demand growth, a more robust counter-cyclical adjustment in monetary policy is crucial, promoting stable economic operations.
Experts also pointed out that this round of policy adjustments has targeted two critical areas: the real estate sector and the capital market. In May, housing credit policies were optimized with the establishment of re-lending for affordable housing to help manage stock. Come September, there was a further reduction in existing mortgage rates and the minimum down payment ratio for home loans, alongside extensions for some real estate financial policies.
Additionally, the PBOC established two structural tools to support the stable development of the stock market. Coinciding with these efforts, monetary policy is increasingly focused on aiding structural economic transformations, emphasizing support for key sectors and addressing weaknesses, thereby enhancing the mobilization of inefficient financial resources.
Deng Ximiao concluded that overall, as China accelerates structural adjustments and transitions to new growth drivers, the exploration of effective domestic demand will be crucial, particularly in promoting expanded consumer demand. Monetary policy will collaborate with other macroeconomic policies to enhance support for achieving dynamic equilibrium in supply and demand.
