China Accelerates Money Supply... New Bank Loans Double in One Month

As 5.5% Growth Target Fades, Loans Increase to Accelerate Economic Stimulus
Double the Market Forecast of 1.8 Trillion Yuan

[Image source=Yonhap News]

[Asia Economy Beijing=Special Correspondent Kim Hyun-jung] China's new bank loan volume in September nearly doubled compared to the previous month, far exceeding expectations. This was the result of focusing on pumping money into infrastructure, manufacturing, and real estate sectors to boost the slowing economic growth rate as much as possible within the year.

According to the People's Bank of China on the 12th, new yuan loans in September amounted to 2.47 trillion yuan (approximately 494 trillion won), a 48.9% increase compared to the same period last year (1.6592 trillion yuan). Compared to new loans in August, one month earlier (1.25 trillion yuan), the scale was nearly double. It also far exceeded market experts' expectations (1.8 trillion yuan). Household loans, including mortgage loans, surged from 458 billion yuan in the previous month to 650.3 billion yuan this month, and corporate loans jumped from 875 billion yuan to 1.92 trillion yuan.

◆Money exceeding 5 quadrillion won released following the order to "increase loans"= With an increase in bond issuance to support large-scale construction projects, the scale of social financing in September was 3.53 trillion yuan, a 21.5% increase compared to the same period last year (2.9055 trillion yuan). Social financing includes loans outside the existing bank loan system, such as initial public offerings (IPO), trust company loans, and bond sales.

As of the end of September, the broad money supply (M2), which measures the amount of cash in circulation and all deposits, stood at 262.66 trillion yuan, a 12.1% increase from a year earlier (234.4 trillion yuan). The money circulating in the market exceeds 5 quadrillion won based on the Korean won.

Internally, the increasing loan amount is welcomed. China has actively pumped money since the first half of the year, aiming to make the third quarter a turning point for recovery after economic sluggishness continued until the second quarter due to repeated lockdowns to prevent the spread of COVID-19 and pressure from the real estate market downturn. Premier Li Keqiang of the State Council repeatedly urged at State Council meetings that loans must be rapidly and significantly increased as necessary for economic development.

Following the People's Bank of China's announcement, Won Bin, chief economist at China Minsheng Bank, diagnosed, "Growth stabilization policies are continuously expanding and accelerating, and loan demand in the corporate and residential sectors continues to recover." Mingming, chief economist at Zhongxin Securities, also explained, "Corporate loans have increased significantly, reflecting the gradual effect of a series of policy tools. Policy-based development financial tools, special re-lending for equipment renewal and renovation, and other early-stage structural monetary policy tools have greatly increased demand for corporate loans."

◆Internal forecasts also predict '3.5% growth this year'= However, the consensus among experts is that China's economic growth rate is unlikely to rebound sharply in the short term. China's gross domestic product (GDP) growth rate fell to 0.4% year-on-year in the second quarter, showing sluggishness, but a recovery to around 4.8% was expected in the third quarter. However, the Chinese financial information company Wind forecasted that the third-quarter growth rate would record 3.5%, falling short of expectations. The annual growth rate was projected at 3.6%, far below the original target of 5.5%.

The World Bank (WB) expects China's economic growth rate to remain sluggish this year, falling behind developing countries in the region for the first time since 1990. In its recent semi-annual report on the economic conditions of developing countries in the East Asia and Pacific region, the WB forecasted China's economic growth rate this year at 2.8%, below the regional developing countries' average of 5.3%.

Meanwhile, within China, there are calls for additional support measures and loan expansions, emphasizing the need to solve 'structural problems' through continuous loan expansion. Economist Mingming observed, "The overall growth rate of housing loans remains relatively weak, especially the growth of medium- to long-term loans to residents has decreased compared to the previous year, indicating the need for additional support in real estate financial policies going forward," adding, "Once support is fully underway, household credit demand is expected to gradually recover over the next few years."

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