Total Social Financing Rises 12.5% YoY in May as “Loose Credit” Conditions Emerge in China

The latest data on China’s monetary system points to a sizeable rise in credit extension in May, with one analysts referring to it as the start of a “loose credit” era.

Figures released by the Chinese central bank indicate that total social financing (TSF) hit 268.39 trillion yuan (approx. USD$38.01 trillion) at the end of May, for a YoY rise of 12.5%.

TSF refers to the ag­gre­gate vol­ume of funds pro­vided by Chi­na’s do­mes­tic fi­nan­cial sys­tem to the pri­vate sec­tor of the real econ­omy within a given time­frame.

Central bank data indicates that TSF saw an expansion of 3.9 trillion yuan in the month of May, as compared to 3.09 trillion yuan in April.

Li Yiju (李义举), from form the Bank of China (BOC), said that the rise in TSF had mainly been driven by renminbi loans, government bonds and enterprise bonds.

May saw the extension of 1.55 trillion yuan in new loans to the real economy, for an increase of 364.7 billion yuan for the same period last year.

Net government bond financing was 1.14 trillion yuan, for a YoY expansion of 750.5 billion yuan, while net enterprise bond financing was 297.1 billion yuan, for a YoY expansion of 193.8 billion yuan.

Figures from the Ministry of Finance indicate that 1.3 trillion yuan in local government bonds were issued in May, for record-high single month issuance.

“This plus sovereign bonds, standard bonds, the rapid growth in net financing via government bonds, drove comparatively rapid growth in total social financing,” said Dong Ximiao (董希淼), researcher with XW Bank.

According to Dong the increase points to accelerated resumption of work and production by enterprises following the effective containment of COVID-19, as well as the recovery of the Chinese economy.

Dong said it is also significant of expansion in support of the real economy by financial institutions in China, and the accelerated creation of “loose credit” conditions.

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