The financial sector in China is experiencing a significant shift, as evidenced by recent statistics released by the People's Bank of China (PBOC) on January 14. The data indicates an 8% year-on-year growth in the scale of social financing by the end of December 2024, along with a 7.3% increase in the broad money supply (M2) and a 7.6% rise in RMB loansThis information paints a picture of financial stability, even as various metrics reflect a mix of increases and decreases compared to the previous month.

As of December 2024, the total social financing balance stood at an impressive 408.34 trillion yuan, representing an increase of 0.2 percentage points compared to the previous month's growth rateZhang Wenhong, the head of the PBOC's Survey and Statistics Department, remarked that the overall growth of social financing has remained reasonable, which significantly supports the recovery of the real economy throughout the year.

Upon deeper analysis, several noteworthy trends emerged from the structure of social financing increment

Firstly, the loans extended by financial institutions to the real economy saw a significant increase, with 17.05 trillion yuan added to the lending books in 2024 aloneSecondly, the financial system's collaboration with fiscal policies has been robust, with government bond issuance marking a historical peakIn total, net financing through government bonds reached 11.3 trillion yuan, a 1.69 trillion yuan increase from the same time last yearThis included net financing of 4.5 trillion yuan from national bonds and 6.79 trillion yuan from local government bonds.

Corporate bond financing also outperformed last year's figures, contributing 1.91 trillion yuan to net financing—283.9 billion yuan higher than the previous yearMoreover, informal financing through trust loans surged, rising by 397.6 billion yuan, which encapsulates an annual increase of 240 billion yuanThese dynamics indicate that businesses are engaging more with traditional financing routes, a promising sign for the economy at large.

A focal point for the financial sector's development is the promotion of five critical areas: technology finance, green finance, inclusive finance, pension finance, and digital finance

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The latest data demonstrate a robust uptick in lending across these segmentsBy the end of 2024, medium to long-term loans for the manufacturing sector rose to 13.97 trillion yuan—an 11.9% increase year-on-yearNotably, loans to specialized and innovative enterprises hit 4.26 trillion yuan, reflecting a 13% year-over-year uptickThe inclusive financing for micro and small enterprises also saw a commendable rise, reaching 32.93 trillion yuan or a 14.6% growth.

The initiatives launched by the PBOC since the Central Financial Work Conference have included a suite of guiding documents across various sectors, enhancing the synergy between policy design and executionAccording to Zou Lan, head of the Monetary Policy Department, the bank has implemented a range of measures to facilitate this transitionFor instance, the central bank allocated 500 billion yuan in relending for technology innovation and improvements to incentivize financial support related to technological advancements

Furthermore, in green finance, enhancements have seen support extended to low-carbon transition projects, while inclusive finance has seen interest rates for loans targeting agricultural and small entities reduced from 2% to 1.75%.

The policy landscape is now sufficiently robust, providing comprehensive structural coverage across all five focal areasProjeted outcomes have begun to materialize, marking a crucial phase for development moving forwardZou Lan indicated that ongoing improvement to the top-level design of policies is in the works, which aims to provide more refined measures catering specifically to key sectors and weak points in the financial landscape.

As a result of these efforts, the cost of financing has been on a downward trend, with loan interest rates maintaining historically low levelsNew corporate loans were reported at a weighted average interest rate of approximately 3.43% in December 2024, which is about 36 basis points lower than the same period last year

Meanwhile, personal housing loans maintained a lower benchmark at around 3.11%, reflecting an 88 basis points decrease over the year.

Since September 2024, a series of incremental policies have been introduced that are beginning to produce positive effects on market expectations and consumer confidenceThe Central Economic Work Conference emphasized the importance of adopting an agile macroeconomic policy, which is crucial in solidifying expectations among society and boosting public trust in the economyExperts acknowledge that the adjustments in macro policies take time to influence investment decisions from both enterprises and households, as well as the overall credit atmosphere in the marketHowever, the prospects for improved demand for credit and continued funding needs are looking promising, as financial institutions direct more resources toward major strategies, pivotal sectors, and weaker areas to support sustainable economic growth.

Xuan Changneng, the Deputy Governor of the PBOC, highlighted that moving forward, macroeconomic policy will be reinforced to better manage countercyclical adjustments