The release of financial data by the People's Bank of China (PBOC) on November 11 has shed light on the current state of the Chinese economy, highlighting some encouraging trends and painting a complex picture of the monetary landscape as we approach the end of the yearAccording to the PBOC, the balance of broad money (M2) stood at a staggering 309.71 trillion yuan at the end of October, representing an annual growth rate of 7.5%—a noticeable increase from the previous month’s 6.8%. The social financing scale also showed strength, reaching 403.45 trillion yuan, up 7.8% year-on-yearAdditionally, the balance of all RMB loans grew by 8%, indicating robust borrowing activity across various sectors.

The uptick in the M2 growth rate over the last couple of months can be attributed to several key factorsFirstly, there appears to be a significant reversal with investment from the bond market and wealth management products now flowing back into deposits—a trend that suggests investors are currently prioritizing safety over risk amidst global uncertainties

Secondly, banks have ramped up their funding to financial institutions beyond their traditional scope, such as securities and mutual fund companies, further expanding the liquidity in the marketFinally, the acceleration of fiscal expenditure has transformed financial reserves into corporate deposits, thereby boosting the money supply and fueling economic growth.

Economist Wen Bin from China Minsheng Bank pointed out that a recent package of financial policies introduced by the central bank has positively influenced economic sentimentThe backdrop of these policies is quite significant: they have not only buoyed capital market stability but have also transitionally shifted investors' risk appetites from a conservative, defensive posture toward a more proactive asset allocation strategyThese changes are expected to further innovate the channels between commercial banking and non-banking financial institutions, allowing for increased liquidity throughout the financial markets.

For October, the growth in narrow money (M1) slowed less than in previous months

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This deceleration indicates a stabilization in economic activities and an improved sense of confidence among the populace, partially driven by an enhanced appetite for risk within the financial frameworkAnalysts are cautiously optimistic; they predict a hopeful trend in M1 growth moving forward as these recent supportive policies begin to take tangible effect within the financial milieuIn a dedicated investigation of the money supply statistics, the PBOC plans to refine its approach, thereby ensuring that future measurements of M1 align more effectively with ongoing innovations within the financial sector.

Despite the inflated base from last year’s statistics, social financing continues on a healthy trajectoryThe amount of government bonds issued in October 2023 reached a new height of 1.56 trillion yuan, significantly outpacing the trends observed from 2020 to 2022. A noteworthy aspect of this surge is traced back to the expedited issuance of special refinancing bonds from local governments initiated in October of last year, which were advantageous in settling overdue debts owed to companies, thus intensifying the social financing base and affecting the year-on-year growth rates.

On the credit front, experts note a balanced and stable influx bolstering continued economic momentum

A large financial institution recently disclosed that over the first three quarters, new loan allocations exceeded 110 trillion yuan—approximately 8 trillion yuan more than the same period last year, and almost 20 trillion yuan more compared to 2022. This simultaneous growth in both recovery and new disbursements highlights an effective reactivation of dormant credit assets, indicating increased efficiency in loan issuance.

Moreover, lending rates have remained at historically low levels, enhancing affordabilityIn October, the weighted average interest rate for newly issued corporate loans was about 3.5%, while the rate for new personal housing loans stood at around 3.15%. With mortgage rates now declining, signs of stabilization are beginning to emerge in the real estate market, and the recent momentum seen in corporate financing signals a renewed optimism as businesses show an eagerness to utilize tools aimed at propelling capital market stability.

As the financial landscape continues to evolve, analysts believe the strong base for sustained growth remains intact

Wang Qing, a chief macro analyst at Dongfang Jincheng, asserts that under the framework of these proactive policy changes, public expectations and market confidence will steadily improve, leading to enhanced effective financing needsAs more supportive measures unfold, a ripple effect is anticipated, providing stronger and more effective financial backing to encourage high-quality development of the real economy.

Recently, Pan Gongsheng, in a meeting, emphasized the intention to amplify the intensity of monetary policy adjustments, improving the quality and efficiency of financial services while bolstering support for high-quality economic growthThe general sentiment in the market indicates that this supportive monetary policy stance is unlikely to shift in the short term, and expectations align with the anticipation of continued robust monetary policy throughout next yearThis environment seeks to foster a stable and conducive financial backdrop tailored toward maintaining economic stability and promoting sustained high-quality development.