The total financial volume indicators maintained a reasonable growth level in the first four months.

The financial statistics report released by the People's Bank of China on May 14 shows that in the first four months of this year, the total social financing increased by 15.45 trillion yuan, and RMB loans grew by 8.59 trillion yuan. At the end of April, broad money (M2) grew by 8.6% year-on-year, an increase of 0.1 percentage points from the previous month; the stock of total social financing increased by 7.8% year-on-year, matching the economic growth and price level expectations.

Overall, the financial aggregate indicators for the first four months continued to maintain a reasonable growth level, reflecting that current social financing conditions in China are accommodative, and effective financing needs of the real economy are being fully met. As a reflection of current economic activity, at the end of April, narrow money (M1) grew by 5% year-on-year, indicating that enterprise production and operations have remained active over the past period.

Currently, the cost of social financing in China remains low. In April, the weighted average interest rate for new corporate loans (both domestic and foreign currency) was about 3.1%, approximately 20 basis points lower than the same period last year; the weighted average interest rate for new personal housing loans (both domestic and foreign currency) was about 3.1%, about 6 basis points lower than the same period last year.

Looking at market interest rate trends, the average overnight rate in the money market (DR001) for the first four months was 1.3%, generally operating around the central bank’s policy rate of 1.4%. The liquidity in the banking system has remained ample, providing a good liquidity environment for corporate financing and government bond issuance.

At the end of April, the growth rate of RMB loans slowed to 5.6%, down 0.1 percentage points from the end of the previous month.

Regarding the loan structure, in the first four months, RMB loans increased by 8.59 trillion yuan, of which household loans decreased by 490.2 billion yuan, and corporate (enterprise) loans increased by 8.99 trillion yuan. Since the beginning of the year, growth in personal loans has slowed, leading to a continued decline in the leverage ratio of the household sector, from 62.3% in the first quarter of 2024 to 59% in the first quarter of 2026.

The slowdown in personal loan growth and the steady decline in household leverage ratios are natural processes for residents to voluntarily reduce debt burdens and improve their balance sheets. Despite the slowdown in loan growth, government bonds and corporate bonds financing have shown rapid growth this year, providing some replacement and substitution for loans.

In the first four months of this year, net financing of corporate bonds in the social financing increased by 1.5 trillion yuan, an increase of 739.3 billion yuan year-on-year, nearly doubling in scale. Wen Bin, chief economist at Minsheng Bank, predicts that with the ongoing structural changes in the economy and finance, the expansion and mutual supplementation of diversified channels such as corporate bonds and equity financing will continue to exert substitution effects on bank loans.

Apart from the significant increase in net corporate bond financing, the scale of government bonds has also grown rapidly, supporting economic development and risk mitigation, while also replacing some loans. In the first four months, about 1.2 trillion yuan of replacement bonds were issued to replace existing implicit debt, with the issuance progress reaching about 60%.

In the short term, since a large proportion of bond issuance funds are used to repay bank loans, this will exert some downward pressure on loan growth figures. According to market estimates, after adjusting for the impact of local special bond replacements, the loan growth rate at the end of April was about 6.1%.

Both loans and bonds are important channels for financing the real economy and can be observed collectively. From an international perspective, major institutions such as the Federal Reserve and the Bank for International Settlements include both loans and bonds in their “credit” statistics. For China, if this approach is adopted, combining bank loans and bank bond investments, the growth rate of this combined indicator in recent months has been around 8%, far higher than the 5%–6% loan growth rate, and more consistent with the trends of social financing, M2, and other financial aggregate indicators, according to authoritative experts.

【Author: Sun Lulu, He Jueyuan】 (Editor: Wen Jing)

Keywords: Social Financing Loans