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On November 14th, recent data shows that China’s broad money supply, known as M2, along with overall social financing, grew at a faster rate in October compared to the previous year. Industry experts attribute this growth primarily to declining borrowing costs and an increase in government bond issuance.
In October, China’s M2 balance rose by 8.2% year-over-year to CNY 335.1 trillion (approximately USD 47.2 trillion), marking a 0.8 percentage point increase from the same period last year, according to data released by the central bank yesterday. Meanwhile, total social financing increased by 0.7 percentage points to CNY 437.7 trillion (about USD 61.5 trillion). From January to October, new social financing surged 14.4% compared to the previous year, reaching CNY 30.9 trillion (roughly USD 4.35 trillion).
Industry insiders note that lower financing costs clearly signal a more accommodative monetary policy environment. The weighted average interest rate on newly issued corporate loans in October was 3.1%, which is 40 basis points lower than the same period last year. The average rate for new mortgages was also 3.1%, an 8 basis point decrease from a year earlier, helping maintain low lending rates.
Analysts highlight that government bond issuance has been a key driver behind the expansion in social financing. Between January and October, the government issued about CNY 22 trillion (USD 3 trillion) in bonds, representing an almost 22% increase over the same period last year. Corporate bond issuance has also exceeded last year’s levels.
The composition of social financing is gradually evolving. More than half of this year’s increase has come from alternative financing sources outside traditional loans, according to an expert. This shift indicates that focusing solely on bank lending as a financial indicator doesn’t fully capture how finance is supporting the real economy.
The financial structure continues to tilt toward supporting economic transformation and upgrading. By the end of October, inclusive loans to micro and small businesses grew 11.6% year-over-year to CNY 35.7 trillion (around USD 5 trillion). Medium- and long-term loans to the manufacturing sector increased by 7.9%, reaching CNY 14.9 trillion (nearly USD 2 trillion), both outpacing the overall loan growth rate of 6.5%.
Leverage ratios in the government sector saw an increase of 8.8 percentage points as of September 30th from the previous year, reaching 67.5%, according to leverage data. The leverage ratio for non-financial corporations rose by 4.5 percentage points, while household sector leverage dipped by 1.2 percentage points. These changes reflect the government’s strategy of taking on more debt to support business stabilization and growth.
Money flow has also intensified notably. The narrow money supply, or M1, increased by 6.2% year-over-year to CNY 112 trillion (about USD 15.7 trillion), rebounding by 6.1 percentage points from its low earlier this year. The gap between M1 and M2 has narrowed to -2%, indicating rising business activity and a recovery in consumer spending.
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