(Yicai) Oct. 16 -- China’s newly added social financing, a broad measure of credit liquidity, beat chief economists’ expectations last month, indicating that the financing demand in the real economy picked up and the market confidence has been recovering.

Newly added social financing in the world’s second-largest economy rose CNY563.8 billion (USD78.5 billion) to CNY4.12 trillion (USD568.3 billion) last month from a year earlier, according to the latest data from the People’s Bank of China. Chief economists polled by Yicai had earlier predicted the figure to come in at CNY3.78 trillion.

In the first three quarters of the year, China’s newly added social financing totaled CNY29.33 trillion (USD4.1 trillion), based on preliminary statistics, up CNY1.41 trillion from the same period last year, the country’s central bank also noted.

Newly added social financing rose last month mainly because of faster issuance of government bonds, such as special bonds, in August and September, indicating that there will be more effort in fiscal expansion in the fourth quarter, according to Huajin Securities.

New yuan-denominated loans fell CNY176.4 billion to CNY2.31 trillion last month from a year earlier, data from the PBOC also showed. Meanwhile, the figure for the first three quarters of the year soared CNY1.58 trillion to CNY19.75 trillion from the same period last year.

The decline in new yuan loans in September was caused by a high base number a year earlier, as new yuan loans were generally strong last month, Huajin Securities noted.

New yuan loans remained strong last month, thanks to a loose credit loan policy, recovered financing demand of market entities, and the end-of-quarter effect, said Wen Bin, chief economist at China Minsheng Bank. The rise in new yuan loans in the first nine months of the year indicates that the financial support for the real economy was enhanced to help the gradual economic recovery, he added.

The balance of M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 10.3 percent to CNY289.67 trillion as of the end of September from a year earlier, down 1.8 percentage point from the growth in the same period of last year and missing the figure of 10.6 percent forecast by chief economists earlier surveyed by Yicai.

M2’s growth continued to shrink last month but remained around 10 percent, indicating that the steady monetary policy was accurate and robust and that liquidity in the market was reasonable and sufficient, said Dong Ximiao, chief researcher at CMB-China Unicom Consumption Finance.

The balance of M1, a narrow measure of money supply that covers circulating cash and non-bank and non-government deposits, rose 2.1 percent to CNY67.84 trillion last month from a year earlier, the PBOC said.

The growth percentage gap between M2 and M1 narrowed to 8.2 percent in September, showing that the economic vitality and enterprises’ confidence rose, Dong noted.

Whether September’s growth in household credit loans will continue remains to be seen, Huajin Securities said, predicting that China will still need to cut the reserve requirement ratio and interest rates this year and that the moderate-to-loose monetary policy stance and operations will continue until next year.

The PBOC will keep a prudent monetary policy, follow the effects of previous policies, and promote the policies to become effective, Zou Lan, head of the monetary policy department at the PBOC, said at a press conference on Oct. 13. The monetary policy has enough room and reserves for unexpected challenges and changes, Zou added.

Editor: Futura Costaglione