China's new yuan loans on the rise

China's new yuan-denominated loans expanded to 12.09 trillion yuan (about 1.73 trillion US dollars) in the first half of 2020, up 2.42 trillion yuan year on year, data showed on Friday.

In June alone, new yuan loans hit 1.81 trillion yuan, a year-on-year increase of 147.4 billion yuan, said the People's Bank of China (PBOC), the central bank.

Loans in the household sector and the corporate sector in H1 increased by 3.56 trillion yuan and 8.77 trillion yuan respectively, with medium and long-term loans accounting for the majority.

The M2, a broad measure of money supply that covers cash in circulation and all deposits, rose by 11.1 percent year on year to 213.49 trillion yuan at the end of June, the PBOC data showed.

The growth rate was unchanged from that seen at the end of May, and up 2.6 percentage points when compared with that for the same period last year.

The narrow measure of the money supply (M1), which covers cash in circulation plus demand deposits, stood at 60.43 trillion yuan by the end of June, up 6.5 percent from a year ago.

M0, the amount of cash in circulation, rose 9.5 percent year on year to 7.95 trillion yuan by the end of last month.

Friday's data also showed that newly-added social financing, a measurement of funds the real economy receives from the financial system, came in at 20.83 trillion yuan in H1, up 6.22 trillion yuan year on year.

The above-expectation credit and social financing expansion in H1 demonstrated that the financial sector stepped up efforts in shoring up the real economy, said Wen Bin, chief analyst at China Minsheng Bank.

By the end of June, outstanding social financing increased by 12.8 percent year on year to 271.8 trillion yuan, with outstanding loans to the real economy jumping by 13.3 percent to 163.9 trillion yuan, accounting for 60.3 percent of the total.

Improvements were also seen in direct financing channels with warm-up signs of the capital market, Wen noted.

Net financing via corporate bonds saw stellar growth of 1.76 trillion yuan from a year ago to reach 3.33 trillion yuan in H1, while non-financial firms' stock financing in China's mainland almost doubled from a year ago to 246.1 billion yuan.

The country will use a variety of tools such as required reserve ratio reductions, interest rate cuts, and re-lending to enable M2 money supply and aggregate financing to grow at notably higher rates than last year, according to this year's government work report.