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China: Growth in M2 and new loans improves in February

March 12, 2015

New yuan loans totaled CNY 1.02 trillion (USD 163 billion) in February, which was below the CNY 1.47 billion recorded in the previous month. The print, however, largely overshot the CNY 750 billion that market analysts had expected. In the 12 months up to February, new yuan loans totaled CNY 10.3 trillion (January: CNY 9.9 trillion), which represented the highest value on record.

Total social financing—a broader measure of liquidity in the economy that includes loans, bonds and other non-traditional instruments—eased from CNY 2.05 trillion in January to CNY 1.35 trillion in February. That said, the print came in above the CNY 1.00 trillion that market analysts had expected.

Annual M2 growth, the broadest measure of money supply in China, recovered strongly from January’s record low of 10.8% to 12.5% in February. The result was above the 11.0% increase the market had expected and represented the fastest growth in four months.

According to analysts, both money and new lending data improved in February as M2 accelerated markedly and credit growth beat market expectations. The main drivers behind February’s performance were a seasonal effect related to the Chinese New Year and a loser monetary policy stance from the People’s Bank of China. The fact that banks usually front-load their lending quota at the beginning of the year to protect their market share has also played a role.

FocusEconomics Consensus Forecast participants expect M2 to expand 12.3% in 2015, which is unchanged over the previous month’s forecast. In 2016, the panel sees M2 growth of 11.7%.


Author: Ricard Torné, Lead Economist

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China Money Chart


China Money February 2015

Note: New yuan loans in CNY billion and year-on-year variation of M2.
Source: People’s Bank of China (PBOC) and FocusEconomics calculations.


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