C50 Market Sentiment Index Survey: New Social Financing in May May Increase YoY, with M2 YoY Growth Rate Expected to Continue Rebounding

The latest "C50 Direction Index" survey by Cailian Press shows that the market consensus forecast for new RMB loans in May stands at 600 billion yuan, down 35 billion yuan YoY from 95 billion yuan in the same period last year. The median forecast for new aggregate financing in May is 2.32 trillion yuan, up 26 billion yuan YoY. Market participants expect M2 growth may pick up in May amid improved liquidity and low base effects.

On prices, the market anticipates CPI to remain relatively stable in May while PPI deflation may widen further. The median forecasts for CPI and PPI YoY growth rates are -0.2% and -3.3% respectively.

The "C50 Direction Index Survey", initiated by Cailian Press and completed with participation from various research institutions, comprehensively reflects market expectations on macroeconomic trends, monetary policy sentiment and financial data. Nearly 20 institutions participated in this round.

Market consensus forecasts median new RMB loans in May at 600 billion yuan

In April, new RMB loans totaled 280 billion yuan, down approximately 450 billion yuan YoY. Household loans decreased by 521.6 billion yuan while corporate loans rose by 610 billion yuan, mainly driven by bill financing.

For May, the median forecast for new RMB loans is 600 billion yuan, down 35 billion yuan YoY, with projections ranging from 430 billion to 1.25 trillion yuan.

Market analysts attribute weak credit expansion in May primarily to constrained corporate loan demand, with future trends heavily dependent on fiscal policy intensity.

Corporate loan growth YoY was mainly supported by increased bill financing, reflecting still weak effective loan demand and subdued financing appetite among real-economy enterprises. Data shows bill rates in May first declined then rebounded, maintaining April's sideways trend.

Binbin Sun, chief economist at Caitong Securities, noted: "The phased implementation of comprehensive financial support policies announced by the PBOC on May 7, coupled with slightly rising bill rates in late May, both indicate weaker bank demand for bill-based credit expansion. Credit is expected to strengthen MoM but remain weaker YoY."

Additionally, weak medium and long-term corporate loans in May were significantly affected by local government debt restructuring.

Wenlang Zhang, chief macro analyst at CICC, stated: "New credit in May may remain relatively weak, with our forecast showing a YoY decline. An important factor remains potential reductions in credit stock due to government bond swaps."

"Affected by local governments' efforts to resolve debt, some outstanding loans in the hidden debt of urban investment platforms have been replaced or repaid early. New loans are calculated as the difference between newly issued loans and loans repaid in the current period. Therefore, the scale of new loans in the month will be affected to a certain extent," said Liao Bo, the co-chief macro analyst at Zheshang Securities. In the first five months of this year, special refinancing bonds issued by various provinces for debt replacement totaled 160 million yuan, causing technical disruptions to credit.

New aggregate financing in May may increase YoY, and the YoY growth rate of M2 may continue to rebound.

In April, new aggregate financing reached 1.16 trillion yuan, with the YoY increase expanding to 1.2 trillion yuan, mainly driven by government bonds.

According to this survey, the median forecast for the scale of new aggregate financing in May by market institutions is 2.32 trillion yuan, an increase of 260 billion yuan compared to 2.06 trillion yuan in the same period of 2024. The forecast range of participating institutions is from 2 trillion yuan to 2.74 trillion yuan.

Overall, government bonds are expected to remain the main contributor to aggregate financing in May. High-frequency data shows that the net financing scale of government bonds in May was approximately 1.46 trillion yuan, still achieving a YoY increase of nearly 268.8 billion yuan compared to the high base in the same period last year.

In addition, the industry expects that with the gradual allocation and use of fiscal funds, it may positively drive M1.

Lu Zhengwei, the chief economist at Industrial Bank, said that under the influence of "deposit outflow" in May 2024, the growth rate of M1 significantly pulled back. Given the low base and the continuous advancement of debt resolution policies, the growth rate of M1 in May 2025 is expected to rise significantly.

Regarding M2, on May 7, the People's Bank of China announced comprehensive RRR cuts and interest rate cuts. The RRR cuts are expected to supplement liquidity by around 1 trillion yuan, significantly easing the liquidity situation in May. The DR007 benchmark rate in May fell by 14 basis points compared to April. Lu Zhengwei expects that with the improvement in market liquidity and the impact of a low base, M2 in May may rise.

In Liao Bo's view, the rebound in the growth rate of M2 in May is mainly related to the rectification of manual interest rate adjustments for deposits in April 2024, hence the impact of a low base. In addition, the shift of deposits to wealth management products may continue. In Q1 2025, the People's Bank of China promoted a moderate rebound in government bond yields through measures such as suspending government bond purchases and withdrawing liquidity, which led to a decline in the net value of some wealth management products. This resulted in some funds flowing back from wealth management products to deposit accounts, also supporting the rise in M2.

The YoY growth rate of CPI in May is expected to remain under pressure, while the YoY decline of PPI may continue to widen.

In April, CPI decreased by 0.1% YoY, with the growth rate remaining negative for three consecutive months. The core CPI, excluding food and energy prices, maintained a YoY growth rate of 0.5%.

From a YoY perspective, market institutions forecast the median CPI in May to be -0.2%, with a forecast range of -0.4% to -0.1%. Notably, nearly 60% of market institutions expect the YoY growth rate of CPI in May to remain flat compared to the previous month.

Industry insiders believe that due to abundant seasonal supply, food prices have declined mildly overall, keeping the YoY growth rate of CPI at a low level in May.

Data shows that the Shouguang Vegetable Price Index in China fell by 16.3% YoY in May, further widening from the 14.2% YoY decline in April.

"Regarding pork, from the supply side, the secondary fattening pigs that were replenished earlier are being marketed in succession, and the replenishment of secondary fattening pigs will continue on a rolling basis, keeping supply strong. Meanwhile, holiday demand is weaker than in previous years, driving the average pork price in 22 provinces down by 0.6% MoM in May. In other aspects, we expect non-food consumer goods driven by the trade-in policy to maintain a volume discount trend, while service prices may recover mildly," said Zhang Wenlang.

Looking ahead, Sun Binbin expects vegetable prices to receive some short-term support due to continuous rainfall in many parts of south China, while pork prices are expected to remain in the doldrums due to the pressure from rising marketings. He projects YoY CPI to be -0.2% and -0.4% in June and July, respectively.

In terms of PPI, the YoY decline in PPI widened by 0.2 percentage points to 2.7% in April. The median forecast for YoY PPI in May among participating institutions is -3.3%, with a forecast range of -3.5% to -3.0%.

Regarding the potential further widening of the YoY decline in PPI in May, Wen Bin, chief economist at China Minsheng Bank, analyzed that from an international perspective, the positive developments in Sino-US negotiations have boosted risk appetite, leading to a slight rebound in commodity prices except for gold. However, commodity prices subsequently pulled back due to renewed tariff threats.

Data shows that the monthly average of the CRB Index in May rose by 0.1% MoM, while the monthly average of metal prices fell by 1.6% MoM, the monthly average of industrial raw material prices rose by 0.1% MoM, and the monthly average of Brent crude oil prices fell by 3.7% MoM.

Domestically, the monthly average of the Nanhua Industrial Products Index fell by 2.1% MoM in May, marking the third consecutive month of decline. Among them, the decline in domestically priced steel prices dragged down the metal index by 0.4% MoM; the decline in oil and coal prices drove down the energy and chemical index by 3.3% MoM; the monthly average of the Ministry of Commerce's weekly-published producer goods price index fell by 1.7% MoM, the largest MoM decline since September last year.

In May, among the sub-indices of the manufacturing PMI, the index for the purchase prices of major raw materials fell by 0.1 percentage points to 46.9%, and the ex-factory price index fell by 0.1 percentage points to 44.7%.

In Liao Bo's view, the changes in PPI are mainly influenced by the imported impact of the downward fluctuation in international crude oil prices on China, as well as the accelerated technological progress in some domestic industries and intense market competition pressure.

"We believe that there is still uncertainty in the trend of international commodity prices. However, as domestic policies such as large-scale equipment upgrades and trade-in policies for consumer goods gradually take effect, they will provide some support for prices in certain industries. High-frequency data shows that it will be difficult for the MoM growth rate to return to the positive range," said Liao Bo.