On June 13th, the People’s Bank of China released the latest financial data showing that the total volume of finance continued to grow reasonably and the support for the real economy remained stable. At the end of May, the scale of social financing increased by 8.7% year-on-year, the broad money supply (M2) increased by 7.9% year-on-year, and the balance of RMB loans increased by 7.1% year-on-year.
Key Financial Indicators
Narrow Money Supply (M1): At the end of May, M1 increased by 2.3% year-on-year, up by 0.8 percentage points from the end of last month. The M1 statistical scope includes currency in circulation (M0), demand deposits of units and individuals, and customer reserve funds of non-bank payment institutions. The significant pickup in M1 growth in May indicates that the recently released package of financial support measures effectively boosted market confidence, and economic activities such as investment and consumption picked up somewhat.
Social Financing Scale: In May, the increment of social financing scale was 2.29 trillion yuan, 224.7 billion yuan more than the same period last year, mainly driven by the issuance of government bonds and corporate bonds. Tian Xuan, the director of the National Institute of Finance at Tsinghua University, analyzed that the issuance pace of government bonds this year has been advanced. The net financing scale in the first quarter exceeded 3.8 trillion yuan, an increase of 2.5 trillion yuan compared with the same period last year. In particular, a large number of special refinancing special bonds for replacing implicit debts were issued. Entering the second quarter, while the issuance of special refinancing bonds continued to advance, the issuance of special Treasury bonds was initiated, further accelerating the net financing progress of government bonds. Additionally, there are signs of an acceleration in the issuance of new local special bonds. In May, the scale of new special bonds reached 443.2 billion yuan, setting a new high for the monthly issuance scale this year.
Corporate Bond Financing: Since the second quarter, the cost of corporate bond issuance has generally shown a downward trend at a low level. The average yield to maturity of 5-year AAA-rated corporate bonds in May was 1.97%, further declining from the relatively low level in April. Under the background of low interest rates, enterprises have intensified their bond financing efforts.
Loan Interest Rates: Data from the People’s Bank of China shows that in May, the weighted average interest rate of newly issued loans by enterprises was approximately 3.2%, about 50 basis points lower than the same period of the previous year. The weighted average interest rate of newly issued loans for personal housing was approximately 3.1%, about 55 basis points lower than the same period of the previous year, both at historically low levels.
External Environment and Credit Situation
Changes in the external environment have a marginal impact on the credit situation. Since April, the external environment has changed sharply. Many foreign trade enterprises have actively responded to the impact of tariffs, accelerated the realization of diversified development, and the related credit demand has increased. In mid-May, the Geneva Economic and Trade talks between China and the United States reached an agreement to significantly reduce tariffs for each other within 90 days. Some foreign trade enterprises seized the exemption period to rush exports, and the credit demand accelerated its implementation, which also supported the growth of loans.
Personal Loans and Economic Activity
The growth of personal loans also reflects the changes in the intensity of economic activities. As the local real estate market transactions continue to recover, the issuance of personal mortgage loans has increased. Meanwhile, the promotion activities of this year’s “618” shopping festival have been advanced to mid-May. Coupled with the continued growth of durable goods consumption driven by the trade-in policy, the growth momentum of short-term loans used to support consumption has also improved.
Social Financing Scale and Direct Financing
Against the backdrop of increasingly diverse financing channels and the accelerated development of direct financing, the scale of social financing can more comprehensively measure the intensity of financial support than loans. Pang Ming, a specially-appointed senior researcher at the National Institute of Finance and Development, said that the transformation and upgrading of the economic structure cannot do without the support of a financing system that is compatible with it. Direct financing has the characteristics of risk sharing, benefit sharing, and long-term accompaniment, which is more suitable for the new growth drivers of high growth, heavy research and development, and light assets. In the future, it will play a greater role in the financial system. Against such a background, the scale of social fi
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