(Yicai Global) April 21 -- Growth in China’s credit issuance and social financing is expected to remain stable this year, according to an official at the People’s Bank of China.

In the next stage, the PBOC will keep the growth rates of social financing and M2, a broad measure of money supply that covers cash in circulation and all deposits, basically in line with nominal economic growth to solidify and expand the economy’s recovery, Ruan Jianhong, a spokesperson for the central bank, told Yicai Global.

The real economy’s overall financing costs remained stable in the first quarter, with a slight decline, Ruan noted. Newly added loans to businesses averaged 3.96 percent in March, down 29 basis points from a year earlier, she said, adding that newly-issued inclusive loans for micro- and small-sized firms had an average interest rate of 4.42 percent last month, down 11 basis points from February and 41 bps from the same period last year.

China’s macro leverage ratio rose 8 percentage points to 289.6 percent in the three months ended March 31 from the end of last year, mainly because of seasonal factors, Ruan said, citing preliminary estimates.

Historical data show that the macro leverage ratio tends to increase in the first quarter from the end of the previous year because credit issuance is high in the first three months of each year while gross domestic product growth is usually low, Ruan explained.

China’s economic recovery and development trend are good, which will keep the full-year macro leverage ratio stable, Ruan pointed out.

Zhou Lan, head of the PBOC’s monetary policy department, cautioned that the term ‘deflation’ should be used rationally. China’s economic situation does not match the characteristics of deflation because goods prices are still modestly increasing, social financing and M2 are rising relatively fast, and the economy continues to improve, Zhou said.

Deflation generally features sustained declines in goods prices and the money supply, usually accompanied by an economic recession, he noted.

In the second half, price increases may gradually return to the past average as consumption needs may recover further and the further effects of financial support emerge, Zhou added.

In the medium-to-long run, the Chinese economy has no foundation for long-lasting inflation nor deflation with balanced overall supply and demand, reasonable and appropriate monetary conditions, and stable residents’ expectations.

Editors: Xu Wei, Futura Costaglione