Loans in China Maintain High Growth Rate in July

A Securities Daily reporter, He Jueyuan

In the past month, financial growth has remained at a high level. The People's Bank of China released data on August 13 showing that as of July 31, social financing volume increased by 9% year-on-year; and broad money supply (M2) increased by 8.8%, continuing to reflect a relatively accommodative monetary policy stance.

From the credit structure perspective, as of July 31, outstanding loans for micro-loans increased by 11.8% year-on-year; and long-term loans to manufacturing companies increased by 8.5%, both higher than the growth rate of all loans during the same period. Professor Sheng Songcheng at the Center for Financial Research at the University of International Business and Economics noted that the optimization of credit structure indicates that the combination of policies promoting consumption and technology is effective, and the willingness of manufacturing companies to make long-term investments has increased significantly.

Data shows that while M2's year-on-year growth rate rose by 0.5 percentage points from the previous month, as of July 31, narrow money supply (M1) also rose by 1 percentage point to 5.6%. Compared with M2, which includes time deposits, M1 mainly consists of cash, corporate and personal current accounts, and "live" money in mobile payment systems such as Alipay and WeChat wallets. Since April, the gap between M1 and M2 has continued to narrow, reflecting the improvement in funding liquidity and the effectiveness of policies stabilizing the market.

As corporate financing channels become increasingly diversified, social financing volume indicators can more comprehensively portray the overall picture of financial growth. Data shows that from January to July, social financing volume increased by 23.99 trillion yuan, up 5.12 trillion yuan from the same period last year, demonstrating the effective support provided by finance to the real economy.

Breaking it down further, from January to July, government bond net financing increased by 4.32 trillion yuan year-on-year, which is the main driving force behind social financing growth this year. In light of the requirement from the Central Political Bureau meeting on July 30 to "step up the issuance and use of government bonds," Zhongsheng Securities Research Report expects that in the third quarter, government bond issuance will continue to accelerate, further strengthening the driving force behind social financing growth.

In recent years, direct financing has developed rapidly, with government bonds and corporate bonds being the main channels for direct financing. Professor Sheng Songcheng noted that China's direct financing market is rapidly developing, making it easier for companies to access funds and better suited to economic transformation.

Loans, as one of the financing channels, were not only affected by seasonal factors in July but also influenced by external factors such as local government debt restructuring, small and medium-sized bank reform, and financial institutions breaking up "competitive" competition. As of July 31, outstanding loans increased by 6.9% year-on-year, down from 7.1% the previous month.

As a traditional credit "small month," July loan disbursements have generally trended downward in recent years due to seasonal factors and external influences. In June, financial institutions tend to adjust their lending rhythms temporarily, leading to higher loan data for that month. June is also an important time window for corporate half-year accounting settlements, during which many companies face the need to recover accounts receivable, repay debts, and settle funds.

At the same time, the implicit debt replacement policy has continued to influence loan growth - a large amount of implicit debt has been replaced by low-interest long-term debt, thereby reducing loan growth in the short term. According to market research estimates, the impact of these factors on current loan growth is greater than 1 percentage point, and after removing the impact of debt replacement, the growth rate of outstanding loans approaches 8%.

In recent times, multiple industries have also been influenced by the "anti-competition" factor. Reporters learned from industry insiders that as the relevant departments continue to push for breaking up "competitive" competition and clearing up corporate accounts receivable, small and medium-sized enterprises may see a decrease in credit demand.

In recent months, China's interest rate level has continued to run low. Data shows that the new loan interest rates for companies and personal housing loans were around 3.2% and 3.1%, respectively, down by approximately 45 basis points and 30 basis points from the same period last year.

Interest rates are a signal of the relationship between supply and demand for funds, reflecting that credit supply is relatively abundant, making it easier for borrowers to obtain bank loans with lower costs. Currently, many places are piloting the "clear-cut enterprise loan comprehensive financing cost" program, which will make corporate financing costs more transparent in the future.