China Money October 2020


China: M2 and loan growth decelerates in October

November 11, 2020

In October, Chinese banks distributed CNY 690 billion (USD 104 billion) in new yuan loans. The reading came in below both the CNY 1.90 trillion recorded in September and the CNY 800 billion that market analysts had expected. In the 12 months up to October, new yuan loans totaled CNY 19.5 trillion (12 months to September: CNY 19.5 trillion).

Total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—fell from CNY 3.48 trillion in September to CNY 1.42 trillion in October. Market analysts had expected a sizeable decrease in TSF to CNY 1.40 trillion.

Annual growth in M2—the broadest measure of money supply in China—declined from September’s 10.9% to 10.5% in October. The result was below the 10.9% increase that market analysts had expected.

Despite the deceleration in both loan and M2 growth, analysts argue that the slowdown likely reflected a seasonal pattern and that policymakers should maintain solid support for the economy. In this regard, Iris Pang, chief economist for Greater China at ING, comments that:

“Although the monthly change in loan growth may look worrying, it is no cause for alarm. It's actually quite normal to see small loan growth in October - the beginning of the fourth quarter. Though falling on a monthly basis, the increase was 4.1% year-on-year. We should see a large increase in loan growth again at the beginning of 2021 which, again, is a seasonal phenomenon.”

FocusEconomics Consensus Forecast participants expect M2 to expand 9.0% in 2021, which is up 0.2 percentage points from last month’s forecast. In 2022, the panel sees M2 growth of 9.3%.

Author: Ricard Torné, Head of Data Analysis

Sample Report

Looking for forecasts related to Money in China? Download a sample report now.


China Money Chart

China Money October 20 20 4

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

China Economic News

More news

Search form