Breakdown of April's Financial Data: Government Bonds and Corporate Bonds Boost Social Financing, Trending Changes in Credit Structure

April's financial data has been released. At the end of April, broad money (M2) increased by 8% YoY, while narrow money (M1) increased by 12% YoY. Due to the accelerated issuance of government bonds and the increased issuance of corporate bonds in April, the aggregate financing to the real economy (AFRE) increased by 1.22 trillion yuan YoY. Additionally, at the end of April, the outstanding balance of RMB loans stood at 265.7 trillion yuan, up 7.2% YoY.

Industry experts stated that in April, the overall financial aggregate "showed an upward trend," while financing costs "declined." Overall, the support from finance to the real economy remained substantial, and the implementation effects of multiple rounds of monetary policies by the People's Bank of China were evident.

It has become a consensus within the industry that policy thinking needs to shift towards placing greater emphasis on promoting consumption. Caixin reporters have learned that the current industry view is that the focus of financial policies should be on supporting the supply of high-grade consumption, and the cost of consumer loans on the demand side is no longer a determining factor. Industry insiders also suggest that promoting consumption requires top-level design, with industrial policies making plans, fiscal policies strengthening incentives and guidance, and financial policies providing supportive coordination.

M2 needs to gradually digest the impact of the low base effect

At the end of April, the balance of broad money (M2) was 325.17 trillion yuan, up 8% YoY, while the balance of narrow money (M1) was 13.14 trillion yuan, up 12% YoY. In the first four months, the net cash injection was 319.3 billion yuan.

Why did the growth rate of M2 at the end of April increase significantly? Caixin reporters have learned that, on the one hand, the effect of "squeezing out water" in the financial sector last year was significant. Under the influence of the low base effect from the previous year, the growth rate of M2 at the end of April increased. On the other hand, the phenomenon of deposits "moving" to wealth management products last year did not reappear.

"Since the beginning of this year, the bond market has experienced bidirectional fluctuations, without the overall upward trend seen last year. Deposits also did not experience the significant 'movement' seen last year. Statistically, this has manifested as a smaller year-on-year decrease, which has instead had a positive boosting effect on M2," explained industry insiders.

Industry insiders also pointed out that in April this year, the overall growth momentum of money and credit remained steady and good. The low base from the same period last year would elevate the current data in the calculation of balance growth rates. As the low base effect diminishes, the future growth rate of M2 will return to the normal growth levels seen in the first few months of this year.

Government bonds and corporate bonds boosted the growth of AFRE in April

In April, the incremental AFRE was 1.16 trillion yuan, up 1.22 trillion yuan YoY. From January to April, the incremental AFRE was 16.34 trillion yuan, up 3.61 trillion yuan YoY.

Industry experts analyzed that the accelerated issuance of government bonds was the main driving factor for the growth of AFRE. The increase in corporate bond issuance is also one of the reasons.

Specifically, bond yields fell in April compared to the previous month. Enterprises seized the favorable conditions to increase bond financing, thereby driving down overall financing costs. Data shows that in April, the net financing of corporate bonds was approximately 190 billion yuan, up about 20 billion yuan YoY.

"This year, fiscal support has been substantial, and the pace of bond issuance has been fast, supporting the expansion of domestic demand and credit easing, providing strong support for social financing. The macro policies have been effective since the beginning of the year, with increased fiscal policy intensity and an earlier pace being important factors. These, combined with monetary policy, have formed a stronger synergy, driving a good start to the economy," the aforementioned expert also pointed out.

How did credit performance look after restoring 21,000 debt replacement loans?

At the end of April, the outstanding balance of various RMB loans was 265.7 trillion yuan, up 7.2% YoY. From January to the end of April, various RMB loans increased by 10.06 trillion yuan, roughly in line with the same period last year.

In terms of loan interest rates, the weighted average interest rate on newly issued corporate loans in April was approximately 3.2%, about 4 basis points lower than the previous month and about 50 basis points lower than the same period last year. The weighted average interest rate on newly issued personal housing loans was 3.1%, about 55 basis points lower than the same period last year.

How did credit performance look after restoring the impact of local debt replacement? Industry experts stated that after restoring the impact of local debt replacement, the actual loan support was even higher than the statistical data. "Special refinancing bonds for debt resolution issued in Q4 last year exceeded 2 trillion yuan, and nearly 1.6 trillion yuan were issued from January to April this year. Preliminary market survey estimates suggest that the corresponding replacement loans amounted to approximately 2.1 trillion yuan. After restoration, the growth rate of RMB loans in April remained above 8%."

May is traditionally a "slow month" for credit, coupled with the continued uncertainty in foreign trade. Industry insiders expect effective credit demand to remain affected. However, experts generally believe that the package of financial policy measures jointly launched by the People's Bank of China, the State Administration of Financial Regulation, and the China Securities Regulatory Commission in May has effectively boosted market confidence and played a positive role in restoring the effective demand of the real economy. Overall, the total amount of finance is expected to maintain steady growth in the coming period.

Credit structure transformation, decline in real estate-related loans

The evolution of the credit structure mirrors the changes in the economic structure. Market experts have stated that in recent years, the orientation of China's credit increment has significantly changed, driving the optimization of the credit stock structure.

From the perspective of enterprises and residents, from the end of 2020 to the end of Q1 2025, the proportion of corporate loans increased from 63% to 68%, while the proportion of resident loans decreased correspondingly from 37% to 32%. Behind this rise and fall, it indicates that more credit funds have been channeled into real enterprises. The decline in residents' financing demand is also related to more rational behavior in home buying and investment.

From the perspective of industry investment, from the end of 2020 to the end of Q1 2025, among all medium and long-term loans, the proportion of the manufacturing sector increased from 5.1% to 9.3%, while the proportion of consumer industries rose from 9.6% to 11.2%. In contrast, the proportion of the traditional real estate and construction sectors decreased from 15.9% to 13%.

The cost of consumer loans is not a determining factor; promoting consumption requires top-level design.

The aggregate amount of finance is "on the rise," while financing costs are "declining." Market observers noted that, based on the aggregate financial data from the first four months, the growth rates of total social financing, broad money (M2), and RMB loans continued to outpace nominal GDP growth, indicating that financial support for the real economy remains substantial. The implementation effects of multiple rounds of monetary policies by the central bank have been evident.

Experts pointed out that future macroeconomic policies will place greater emphasis on promoting consumption, with financial policies focusing on supporting the supply of high-grade consumption. The cost of consumer loans on the demand side is no longer a determining factor.

"Currently, promoting consumption requires top-level design and the formulation of medium and long-term development strategies, with simultaneous efforts on both the supply and demand sides. On the demand side, the key is to address issues such as employment, income, and social security to enhance residents' willingness and capacity to consume. Fiscal, employment, and social security policies can play a more direct role in this regard. On the supply side, the focus is on increasing the supply of high-quality consumer goods, which requires industrial policies to make sound plans, fiscal policies to strengthen incentives and guidance, and financial policies to provide supporting cooperation," the aforementioned experts further stated.

Some industry insiders have observed that financial support for household consumption on the demand side has been substantial, resulting in a relatively high leverage ratio among households. Some banks have even engaged in excessive competition for consumer loans, with interest rates on consumer loans falling below their own break-even points. This model is unsustainable and may amplify the debt risks of some highly leveraged groups.

Industry experts further emphasized that the fundamental goal of developing consumer finance is to expand effective consumer demand, broaden consumption scenarios, and ensure that consumer loans are genuinely used to support consumption. The principle of reasonable moderation should be adhered to, and banks need to maintain rational pricing by expanding services, tapping into customer bases, and growing the market, thereby promoting the sustainable development of consumer finance.