China Monetary Policy


New yuan loans moderate while M2 reaches 15-month high in September

Credit conditions continued to provide mixed signals in September, with new yuan loans slowing and M2 reaching its highest level in over a year. New yuan loans totalled CNY 623 billion (USD 99 billion) in September, down from the CNY 704 billion recorded in August. In addition, the reading undershot the CNY 665 billion expected by the market. However, total social financing - a broader measure of liquidity in the economy, which includes loans, bonds and other non-traditional instruments - soared to CNY 1.65 trillion in September (August: CNY 1.25 trillion), signalling that companies may be using other channels to finance their operations. In addition, the People's Bank of China continued to inject liquidity into the banking system via reverse repurchasing operations in order to ease credit conditions. In addition, M2 - the broadest measure of money supply in China - rose 14.8% year-on-year in September, which was above both the 13.5% rise observed in August and the 13.8% increase expected by the market.

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