On August 14, the People's Bank of China (PBOC) released the July financial statistics report, showing that M2 and social financing scale growth rates remain within reasonable ranges, creating a favorable monetary and financial environment for sustained economic improvement. Data revealed that at the end of July, the broad money supply (M2) balance stood at 355.51 trillion yuan, up 7.7% year-on-year, while the outstanding social financing scale reached 463.27 trillion yuan, up 7.4% year-on-year, aligning with targets for economic growth and general price levels. The cumulative social financing scale increment from January to July was 22.25 trillion yuan.

The share of bond and equity financing in total social financing has steadily risen. At the end of July, the outstanding social financing scale grew 7.4% year-on-year to 463.27 trillion yuan, while the M2 balance expanded 7.7% year-on-year to 355.51 trillion yuan. Both indicators have consistently outpaced nominal GDP growth, maintaining relatively loose social financing conditions. In the January-July period, the social financing scale increment totaled 22.25 trillion yuan. In recent years, the share of indirect financing, primarily bank loans, has been declining, while diversified financing channels, including bonds and equities, have seen their proportion steadily increase. According to media calculations, loans accounted for 45.7% of the social financing scale increment in the first seven months, while bond and equity financing together made up 48.02%, surpassing the loan share.

Market experts believe this shift in financing structure is long-term and trend-driven, reflecting China's changing economic growth drivers and deepening structural reforms in the financial sector. For an extended period, China heavily relied on bank-credit-dominated indirect financing, with loans constituting a significant portion of social financing. However, as multi-tiered capital market development accelerates, channels such as bond financing, equity financing, and private equity investment have expanded significantly. Companies can now consider factors like funding costs, financing convenience, and business certainty to choose suitable financing methods, gradually reducing their dependence on traditional bank loans. Data shows that in the first seven months of this year, net corporate bond financing reached 2.52 trillion yuan, up 1.1 trillion yuan year-on-year, while domestic equity financing by non-financial enterprises totaled 406.1 billion yuan, up 184.7 billion yuan year-on-year. Combined, these accounted for 13.15% of the social financing scale increment, 6.27 percentage points higher than the same period last year.

The expert noted that social financing and M2 indicators comprehensively reflect changes in total financial volumes from asset and liability perspectives, respectively. Loans are just one component of social financing and one channel for M2 creation, unable to capture the full picture of financial support for the real economy. When other channels like bonds grow rapidly, slower loan growth is entirely normal. Currently, key financing price indicators such as corporate loan rates and bond yields are at historic lows, highlighting the loose social financing environment and indicating ample fund supply, fully meeting the effective financing needs of the real economy. Since 2018, the weighted average interest rates on corporate loans and personal housing loans have steadily declined from around 5%-6% to about 3% now, while the yield on 5-year AAA-rated corporate bonds has dropped from approximately 4%-5% to around 1.8%.

The credit structure has also improved. At the end of July, the outstanding renminbi loan balance was 282.29 trillion yuan, up 5.1% year-on-year. New renminbi loans in the first seven months increased by 10.38 trillion yuan. By sector, household loans decreased by 827.1 billion yuan, with short-term loans down 928.1 billion yuan and medium- to long-term loans up 101 billion yuan. Corporate loans increased by 11 trillion yuan, comprising short-term loans up 4.34 trillion yuan and medium- to long-term loans up 5.32 trillion yuan. Loan rates remained at historic lows. In July, the weighted average interest rate on new corporate loans was slightly below 3.0%, about 0.2 percentage points lower year-on-year, while the rate on new personal housing loans was approximately 3.1%, roughly flat year-on-year.

Industry experts indicate that the credit market currently faces a situation where supply exceeds demand. Although banks are lending as much as possible to eligible enterprises and individuals, maintaining high loan supply, the transition between old and new growth drivers means that new productive forces naturally require less loan demand. Traditional sectors like real estate and infrastructure are seeing reduced loan demand, compounded by the impact of local government special bonds replacing financing platform loans, leading to an overall decline in loan demand. Similar to price declines in the real economy due to supply exceeding demand, the oversupply in the credit market is also reflected in pricing. In recent years, loan rates have continued to fall, with the weighted average corporate loan rate dropping from around 5%-6% in 2018 to about 3% now, a decline significantly steeper than policy rate cuts.

It is important to note that the "supply exceeding demand" in the credit market does not imply weaker financial support for the real economy or insufficient monetary policy easing. On the contrary, it reflects relatively loose monetary policy. Experts argue that data shows some traditional industries are undergoing adjustment and clearance, while emerging industries thrive, resulting in varying loan volumes across sectors. Loan issuance and repayments offset each other in aggregate data, leading to a smaller loan increment compared to earlier years. However, the effective financing needs of the real economy are fully met, and the structure is more optimized, reflecting better utilization of existing credit resources and improved capital allocation efficiency. Compared to short-term fluctuations in loan increments, structural optimization and enhanced fund utilization efficiency deserve more attention. At the end of July, inclusive small and micro enterprise loans totaled 38.19 trillion yuan, up 9.0% year-on-year, while medium- to long-term loans to the services sector excluding real estate reached 61.94 trillion yuan, up 9.3% year-on-year. Both growth rates exceeded those of total loans.

Counter-cyclical adjustment has been intensified this year. The PBOC continued implementing a moderately loose monetary policy, introducing a series of structural monetary policy measures early in the year. In June, at the Lujiazui Forum, it announced several important measures to reform and improve the monetary policy framework. Recently, the central bank has been promoting diversified loan pricing benchmarks among banks, with some loans already priced referencing DR001, deepening interest rate liberalization reforms. Experts say the structural monetary policy measures introduced by the PBOC early this year have continued to play a leading role, with loan growth in the "five key areas" of finance significantly outpacing overall loan growth, strengthening support for key sectors and weak links. The recent Politburo meeting emphasized that macro policies should be strengthened for effectiveness, comprehensively utilizing and timely adjusting monetary policy tools, and optimizing the implementation of fiscal-financial coordination to boost domestic demand. The PBOC's second-half 2026 work conference and Q2 monetary policy report both stressed continuing a moderately loose monetary policy. Market participants believe this policy will continue to drive the economy toward new, better, and higher-quality development. It is expected that in the second half of the year, the central bank will increase counter-cyclical adjustments, step up efforts to expand domestic demand and optimize supply, promoting sustained economic improvement.