China Sees Increase in New Loans Due to Monetary Policy

Cumulative Social Financing Up 13.3% Year-on-Year
Corporate Bonds Plummet in December Due to Chain Defaults on Corporate Bonds

[Asia Economy Beijing=Special Correspondent Jo Young-shin] Last year, China's new social financing amount temporarily totaled 34.86 trillion yuan (KRW 5921.3196 trillion), an increase of 9.1 trillion yuan compared to the previous year. Social financing is a comprehensive liquidity indicator that includes loans from financial institutions and bond issuance by governments and corporations.

The increase in social financing amount appears to be due to the Chinese government's proactive monetary policy to overcome the economic shock caused by the novel coronavirus disease (COVID-19).

China's state-run People's Daily reported on the 13th that a total of 34.86 trillion yuan of new social financing occurred last year. It added that the cumulative social financing amount reached 284.83 trillion yuan. The cumulative social financing amount increased by 13.3% compared to the previous year.

[Image source=Yonhap News]

Also, last year, new yuan loans in China increased by 2.82 trillion yuan from the previous year to 19.63 trillion yuan.

The People's Daily reported that as of the end of last year, foreign exchange reserves totaled 3.22 trillion dollars.

However, the new increase in social financing for the month of December last year was temporarily estimated at 1.72 trillion yuan, down 380 billion yuan compared to the same month of the previous year.

In particular, new corporate bonds increased by only 44.2 billion yuan in December, down 218.3 billion yuan compared to the same month of the previous year. It appears that the corporate bond market has sharply contracted due to a chain of corporate bond defaults.

In fact, since November last year, large state-owned enterprises such as Huachen Group, a joint venture partner of BMW China, which had received the highest credit rating, have consecutively failed to repay matured corporate bonds.

In December last year, the broad money supply (M2), a cash liquidity indicator, was 218.68 trillion yuan, increasing by only 10.1% compared to the same month of the previous year. This fell short of the market forecast of 10.6% and was 0.6 percentage points lower than the previous month.

This content was produced with the assistance of AI translation services.