The latest data from the People's Bank of China indicates that monetary policy support for the real economy has been notably effective, with financial aggregates maintaining reasonable growth. By the end of June, the broad money supply (M2) had grown by 8.0% year-on-year, while the stock of aggregate social financing had increased by 7.4% year-on-year. The growth rates of both indicators continue to outpace the growth of nominal GDP. Notably, in the first half of the year, new yuan-denominated loans amounted to 10.72 trillion yuan, and new bond financing reached 8.51 trillion yuan, indicating an increased proportion of bond financing.

Financial Data Overview for H1 2026

The financial data for the first half of 2026 overall exhibits characteristics of "stable aggregate volume and structural divergence." An appropriately accommodative monetary policy has provided ample liquidity support for the broader economy in terms of aggregate supply, with no signs of a credit crunch emerging.

Credit Support and Direct Financing Trends

From a structural perspective, financial institutions' credit support for the real economy remains solid. In the first half of the year, the net increase in new yuan-denominated loans extended by financial institutions to the real economy, after deducting repayments, was 10.76 trillion yuan. Furthermore, direct financing by enterprises saw a significant year-on-year increase, with its share rising notably. In H1, net financing via corporate bonds by non-financial enterprises reached 2.07 trillion yuan, an increase of 916.7 billion yuan compared to the same period last year. Equity financing by non-financial enterprises amounted to 293.3 billion yuan, up 122.4 billion yuan year-on-year. Combined, these two channels accounted for 11.3% of the increment in aggregate social financing, 5.6 percentage points higher than the same period last year.

Shift Towards Corporate Bond Financing

In fact, the significant increase in direct corporate financing, particularly bond financing, stands out as a key feature of the financial data. The data shows net corporate bond financing of 2.07 trillion yuan in H1, an increase of 916.7 billion yuan year-on-year. In contrast, the growth rate of yuan-denominated loans has moderated since the beginning of this year.

Long-Term Structural Shifts in Financing

This shift in financing structure is likely long-term and trend-based. It reflects the profound adjustments in China's economic structure and the transition between old and new growth drivers, as well as the dynamic adaptation of the financial system and the deepening of supply-side structural reforms in finance. Looking ahead, monetary and credit growth will continue shifting from extensive expansion to intensive development. A scenario of "slower loan growth with improved quality" may become a new norm in macroeconomic operations.

Improving Credit Structure

The optimization of the yuan-denominated credit structure is already underway. By the end of June, the balance of inclusive loans to micro and small enterprises grew by 8.3% year-on-year, the balance of medium- and long-term loans to the industrial sector increased by 5.9% year-on-year, and the balance of medium- and long-term loans to the service sector (excluding real estate) rose by 9.2% year-on-year. All these growth rates were higher than the overall loan growth rate.

Support for Technology Firms

Particularly under the guidance of structural monetary policy tools, financial institutions' support for technology enterprises continues to rise. Since the beginning of this year, loans to technology-based small and medium-sized enterprises have maintained a growth rate of around 20%.

Special Lending Tools for Innovation

The total quota for the current re-lending facility supporting technological innovation and equipment upgrades stands at 1.2 trillion yuan. Its primary function is to incentivize financial institutions to strengthen financial services for small and medium-sized tech enterprises and large-scale equipment renewal. By the end of April this year, banks had issued 1.5 trillion yuan in loans for technological innovation and equipment upgrades, of which 218.8 billion yuan were for technological innovation. This included first-time loans for 21,000 technology-based SMEs that previously had no credit history.

Monetary Policy Outlook for H2

Looking ahead to the second half of the year, key focuses will include "enhancing the forward-looking, flexible, and targeted nature of monetary policy" and "strengthening counter-cyclical and cross-cyclical adjustments."

Policy Implementation and Framework Evolution

It was also specifically mentioned that the series of structural monetary policy measures introduced at the beginning of the year will be effectively implemented, with continuous improvement in tool design and management. If necessary, based on market demand, tool quotas could be increased and policy elements optimized. Furthermore, regarding the interest rate adjustment mechanism, efforts will continue to steadily and orderly advance the reform and improvement of the monetary policy operational framework to better guide the overnight interbank rate to operate smoothly around the policy rate. In conjunction with primary dealers' needs, the frequency of overnight reverse repo operations will be studied for gradual increase, with proper communication maintained with the market.

Anticipated Policy Direction

It is anticipated that in the second half of the year, monetary policy will undergo marginal adjustments while adhering to the overall accommodative stance, placing greater emphasis on precise regulation and control, and more prominently highlighting its forward-looking, flexible, and targeted nature. In terms of structural guidance, the central bank may increase the quota for re-lending supporting technological innovation and equipment upgrades, and create specialized structural tools targeting service consumption and livelihood sectors. The focus will be on supporting equipment and consumer goods replacement programs and small, micro, and medium-sized business entities, aiming to precisely channel liquidity to the weaker links in the real economy.