Financial statistics for the first three quarters released by the People’s Bank of China (PBC) on October 14 show that at end-September, the outstanding balance of broad money supply (M2), stock of aggregate financing to the real economy (AFRE), and outstanding RMB loans rose by 7.2%, 7.1% and 4.8% year-on-year respectively, with growth rates edging down from the previous month.

Industry experts noted that loans and bonds both serve as key instruments for credit expansion. Since the start of this year, direct financing such as bonds and equities has accelerated, matching financing needs in sectors fostering new quality productive forces and forming sound complements and substitutes for credit lending. The alignment of financial support with high-quality development has improved.

Diversified Financing Channels Take Shape

Since the beginning of the year, aggregate financial volume has maintained reasonable growth, creating a suitable monetary and financial environment for steady economic performance and the shift toward new and high-quality drivers in the first three quarters.

Data shows the cumulative increment of AFRE reached RMB 27.46 trillion in the first three quarters. Structurally, the share of direct financing has risen, highlighting the diversified nature of financing channels. New bond and equity financing together accounted for 49.48% of new AFRE, roughly 7 percentage points higher than the loan share.

Corporate bonds registered robust growth. At end-September, outstanding corporate bonds stood at RMB 36.62 trillion, up 9.3% year-on-year. Industry experts explained that both loans and bonds are important vehicles for credit expansion. As financing channels for the real economy grow increasingly diverse, banks have more avenues for credit creation. Bank bond holdings, just like loan disbursement, constitute a major channel for credit and money creation.

“Current growth rates of AFRE and M2 remain at moderately high levels, indicating overall credit expansion is still solid. What has changed is the structure of credit creation: financing via bonds and equities has picked up while credit lending growth moderated,” said industry experts.

The experts added that changes in supply and demand in the property market and the resolution of local government debt have dampened credit demand in sectors that previously had high loan intensity, including real estate and local financing platforms. By contrast, sectors represented by sci-tech innovation and advanced manufacturing — areas of new quality productive forces — adopt more diversified financing methods. They tend to use bonds and equity to meet differentiated funding needs for enterprises at various growth stages, forming sound supplements and alternatives to bank loans.

Rapid Loan Growth in the “Five Major Priorities” of Financial Work

Outstanding RMB loans hit RMB 283.44 trillion at end-September, rising 4.8% year-on-year, a drop of 0.1 percentage point from the prior month.

While growth moderated, credit structure continued to improve. The PBC disclosed that outstanding inclusive micro and small enterprise loans reached RMB 38.50 trillion at end-September, growing 6.7% year-on-year. Outstanding medium- and long-term loans to the service sector excluding real estate stood at RMB 62.81 trillion, up 9.2% year-on-year. Both loan growth rates outpaced that of total loans over the same period.

“The alignment of financial support with high-quality development has strengthened,” industry experts commented. Since the start of the year, loans under the “five major priorities” of financial work have maintained double-digit growth for consecutive months, accounting for over 70% of new loans. Growth in sci-tech loans, green loans and inclusive micro and small enterprise loans continues to exceed overall loan growth, showing effective financing demand in relevant sectors has been well met.

Industry experts believe that alongside high-quality economic development in recent years, China’s monetary and credit expansion has shifted from extensive growth to intensive development. Financial support for the real economy is no longer reflected merely in loan expansion or growth in aggregate financial volume, but more in structural optimisation and quality improvement.

Lending rates remained at low levels. The PBC reported that the weighted average interest rate on newly issued corporate loans in September was slightly below 3%, about 0.2 percentage points lower than a year earlier; the weighted average rate on newly issued individual housing loans stood at roughly 3.1%, largely unchanged year-on-year.

Improved Precision and Effectiveness of Macroeconomic Policies

Industry experts held that proactive macroeconomic policies have strongly underpinned reasonable expansion in aggregate financial volume.

Multiple incremental financial policies have been rolled out recently. In September, the PBC adjusted and refined several monetary policy tools, focusing on supporting the development of the “Six Networks”, sci-tech innovation, equipment upgrading, and private micro, small and medium-sized enterprises, demonstrating a moderately accommodative monetary policy stance.

Coordination between fiscal and monetary policies has deepened further. In September, the Ministry of Finance, the PBC and the State Financial Regulatory Administration issued the Circular on Implementing Interest Discount Policies for Residential Home Purchase Loans, extending fiscal interest subsidies to the housing sector.

Market participants widely agree that the combined deployment of monetary policy tools and fiscal interest subsidies has further lifted the precision and effectiveness of macro policies. Industry experts said the PBC has introduced two packages of structural monetary policy measures this year. Against the backdrop of shifting growth drivers, these targeted and pragmatic policies guide financial institutions to better serve the real economy and help financial institutions expand their business space.

“Going forward, as the combined effects of existing and new measures further materialise, the financial system will continue to provide robust support for high-quality development of the real economy,” industry experts noted. For example, in investment, as construction of the “Six Networks” moves forward steadily and funds from new policy-based financial tools are released faster, the foundation for stable investment will be further consolidated.

Source: Shanghai Securities News