(Yicai Global) June 11 -- China's fresh yuan-denominated loans and M2 broad money supply rose more than expected last month, which indicates stable support to the real economy, according to chief economists.

New yuan loans jumped to CNY1.5 trillion (USD234.9 billion) from a year ago, some CNY14.3 billion (USD2.2 billion) higher than the increase logged in May 2019.

Yicai Research Institute's survey with chief economists had predicted a slightly lower number. Fresh loans should have tallied CNY1.45 trillion last month, they said.

The increase from a low base of last year underpins economic recovery, said Li Xunlei, chief economist at Zhongtai Securities.

M2

The country's M2 balance was CNY227.55 trillion (USD35.64 trillion) as of May 31, up 8.3 percent from a year earlier, according to the official figure. Chief economists had expected it to grow by 8.21 percent.

M2 rose more than 8 percent mainly because of a high base of last year, as well as China's stable and moderate monetary policy, said Zhou Maohua, analyst at the financial markets department of China Everbright Bank.

The credit environment this year is looser than that of 2019 and favorable for economic recovery, he added.

The gauge, which includes M1, savings deposits, and money market funds, recovered mainly due to the great growth in non-bank deposits and also probably because of some funds stuck in the financial system, said Zhao Wei, chief economist at Kaiyuan Securities.

Social Financing

After the two higher-than-expected numbers, another measure of credit and liquidity in the economy was lower than anticipated.

Total social financing was CNY1.92 trillion in May, or CNY1.27 trillion less than a year ago, the People’s Bank of China announced on its website yesterday. The latest sum should have been CNY2.07 trillion, according to chief economists.

The number edged up slower last month than in late April but maintained a growth rate of over 11 percent for the 15th straight month, said Li from Zhongtai Securities. Considering previous years, the structure is still good, he added.

The sum of new entrusted loans, trust loans, and undiscounted banker's acceptances dropped CNY285.5 billion more last month than they did a year ago, limited by government debts, according to the PBOC.

This year, the central government issued an upper limit for new local government bonds later than last year, said Li. Last month, net government bond financing was CNY466.1 billion less than a year ago, Li said, adding that these two factors put some pressures on social financing.

Non-standard financing, such as entrusted and trust loans, as well as undiscounted banker's acceptances, was decreasing so some demand shifted to other channels, which in turn supports companies’ medium and long-term borrowing needs, Zhao added.

The current monetary policy remains sustainable and moderate in intensity and frequency, said Li. That proves the PBOC’s emphasis on stability, as well as a balance between supply and demand across different cycles, the chief economist added.

Editor: Emmi Laine, Xiao Yi