China’s credit growth accelerated in May, driven by proactive fiscal policies and increased government bond issuance, according to the People’s Bank of China (PBOC). New yuan-denominated loans reached 10.68 trillion yuan ($1.5 trillion) in the first five months of the year.
The M2 money supply—which includes cash in circulation and all deposits—increased 7.9 percent year-on-year to 325.78 trillion yuan by the end of May. The total social financing stock, a measure of funds provided to the real economy, rose to 426.16 trillion yuan, marking an 8.7 percent increase from the previous year.
Analysts attribute the rapid growth to a surge in government bond issuance. “The issuance of government bonds has been front-loaded this year, with net financing exceeding 3.8 trillion yuan in the first quarter,” said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co., Ltd.
“Additionally, the pace of local government special bond issuance has accelerated, with monthly issuance hitting a new high for the year,” he added. In the first five months, loans to enterprises increased by 9.8 trillion yuan, while household loans rose by 572.4 billion yuan.
The M1 money supply, covering cash in circulation, demand deposits, and clients’ reserves of non-banking payment institutions, stood at 108.91 trillion yuan by the end of May, up 2.3 percent year-on-year.
“Proactive fiscal policies are gaining traction, and financial stimulus measures in May have boosted market confidence,” said Dong.
