(Yicai Global) July 12 -- China's newly added social financing and yuan loans surpassed chief economists' predictions in June as the financial system provided generous funding for companies and households as intended to overcome the Covid-19 pandemic.

The addition of social financing was CNY5.17 trillion (USD769.2 billion) in June, up CNY1.47 trillion from a year ago, the People's Bank of China revealed yesterday. Chief economists, polled by Yicai Global, had predicted the indicator of financing to the real economy to be lower at CNY4.32 trillion.

Some of the major drivers of growth were new yuan loans, bond issuances of regional governments, and off-balance sheet bill financing, analysts said.

The easing credit environment is revealing its might as policies to repair the damage caused by the Covid-19 pandemic are kicking in, which will lay a firm foundation for a relatively fast recovery of the Chinese economy in the second half, according to experts.

The social financing volume recovered from May and surged from a year ago, mostly driven by the rebounding credit demand of the real economy and the rising issuance of local governments' special bonds, Zhou Maohua, a macro researcher at China Everbright Bank's department of financial markets, said to Yicai Global. This proves that financing needs are strong and the relevant policies are taking effect, Zhou added.

New yuan-denominated loans tallied CNY2.81 trillion last month, rising by CNY686.7 billion (USD102.1 billion) or the highest year-over-year increase ever in June, according to the central bank. The boost indicates that the implemented policies are coming into full play, said Wang Qing, chief macro analyst at Golden Credit Rating International.

The numbers suggest that Chinese firms' investments and residents' consumption are increasing, Zhou said. In June, the sum of new medium- and long-term loans for residents jumped to CNY416.7 billion from just CNY104.7 billion in May, reflecting a considerable recovery of property demand, the analyst added.

In various Chinese cities, real estate markets were showing signs of rebounding last month, said Wen Bin, chief economist at China Misheng Bank. Meanwhile, local governments were intensifying the implementation of policies to stabilize the real estate market. At the same time, interest rates of medium- and long-term loans fell.

Broad money, or M2, surged 11.4 percent as of June 30 from a year earlier, per the PBOC. The pace of growth accelerated by 0.3 percentage point from late May. Chief economists polled by Yicai Global had forecast the boost to stay lower at 11.02 percent.

The M2 addition remained high because the agenda is to stabilize growth with abundant liquidity, accelerated credit issuance, and fiscal expenditures, Wen at Mingsheng Bank said.

Local governments' assets placed in financial institutions have been decreasing quicker. Fiscal deposits fell by CNY436.7 billion in June, declining by CNY36.5 billion (USD5.4 billion) more than the drop seen a year earlier, according to the PBOC.

Editors: Xu Wei, Emmi Laine, Xiao Yi