China’s Higher-Than-Expected M2, New Yuan Loans in May Serve Real Economy, Experts Say – About Your Online Magazine

(Yicai Global) Jun 11 – China’s new yuan-denominated loans and ample M2 currency supply increased more than expected last month, indicating stable support for the real economy, according to leading economists.

New loans in yuan jumped to CNY 1.5 trillion ($234.9 billion) from a year earlier, about CNY 14.3 billion ($2.2 billion) more than the increase recorded in May. of 2019.

Yicai Research Institute’s survey of leading economists predicted a slightly lower number. The new loans should have totaled CNY 1.45 trillion last month, they said.

Last year’s rise from a low base underpins the economic recovery, said Li Xunlei, chief economist at Zhongtai Securities.


The country’s M2 balance was CNY227.55 trillion ($35.64 trillion) as of May 31, an increase of 8.3 percent from a year earlier, according to official figures. Leading economists had expected growth of 8.21%.

M2 rose more than 8 percent primarily because of a high base from last year, as well as China’s stable and moderate monetary policy, said Zhou Maohua, an analyst in the financial markets department at China Everbright Bank.

The credit environment this year is more fragile than that of 2019 and favorable for economic recovery, he added.

The indicator, which includes M1, savings deposits and money market funds, rebounded mainly due to the large growth in non-bank deposits and also likely because of some funds stuck in the financial system, said Zhao Wei, chief economist at Kaiyuan Securities .

Social Financing

After the two numbers above expectations, another measure of credit and liquidity in the economy was lower than expected.

Total social financing was CNY1.92 trillion in May, or CNY 1.27 trillion less than a year ago, the People’s Bank of China announced on its website yesterday. The last sum should have been CNY2.07 trillion, according to chief economists.

The number rose more slowly last month than at the end of April, but maintained a growth rate of more than 11 percent for the 15th consecutive month, said Li of Zhongtai Securities. Considering previous years, the structure remains good, he added.

The sum of new trust loans, trust loans and undiscounted banker acceptances fell by CNY285.5 billion more last month than a year ago, limited by government debt, according to the PBOC.

This year, the central government issued a cap on new local government bonds late last year, Li said. Last month, net government bond financing was CNY466.1 billion less than a year ago, he said. I read, adding that these two factors put some pressure on social finance.

Non-standard financing, such as trust and fiduciary loans, as well as undiscounted banker acceptances, was declining, so some of the demand shifted to other channels, which in turn supports companies’ medium- and long-term borrowing needs, he added. Zhao.

Current monetary policy remains sustainable and moderate in intensity and frequency, Li said. This proves the PBOC’s emphasis on stability as well as balancing supply and demand across different cycles, added the chief economist.

Editor: Emmi Laine, Xiao Yi

Paula Fonseca