(Yicai) Jan. 16 -- Surging government and corporate bond financing lifted China’s new social financing to CNY35.6 trillion (USD5.11 trillion) last year, while a wider M2–M1 gap pointed to weak private-sector demand and sluggish money circulation, according to central bank data.

China’s new social financing expanded by CNY3.34 trillion (USD479.4 billion) last year from a year earlier, mainly driven by robust direct financing such as government and corporate bond issuance, data released yesterday by the People’s Bank of China showed. However, the scissors gap between M2 and M1 growth widened from 3.1 percentage points in November to 4.7 percentage points, highlighting persistent structural imbalances in financing demand.

The increase underscores the role of more proactive fiscal policy, as government borrowing expanded sharply to support growth. Net financing from government bonds reached CNY13.84 trillion last year, up CNY2.54 trillion from the previous year, while net financing of non-financial enterprise bonds rose to CNY2.39 trillion, an increase of CNY482.5 billion (USD69.2 billion), said Yan Xiandong, director of the Statistics and Analysis Department at the PBOC.

Stock financing by non-financial enterprises totaled CNY476.3 billion, up CNY186.3 billion, benefiting from policies supporting the capital market and more stable investor expectations, Yan added.

Government Demand Leads as Households Lag

Overall social financing demand last year showed a structural pattern of “strong government demand, stable enterprise demand, and weak household demand,” said Wang Yungjin, chief financial researcher at the industry research institute jointly formed by GDD Holding Group and the China Chief Economist Forum. He noted that China remained in a policy cycle characterized by accelerating fiscal support and active monetary cooperation, a stance that is expected to continue this year.

A more proactive fiscal policy will maintain a necessary fiscal deficit, overall debt scale, and expenditure level, Wang said. The fiscal deficit ratio is expected to range between 4 percent and 4.2 percent this year, while new government debt issuance may rise to CNY13 trillion, continuing to support social financing growth.

New yuan-denominated loans reached CNY910 billion in December, down CNY80 billion (USD11.5 billion) from a year earlier. For the full year, new yuan loans totaled CNY16.27 trillion, a decrease of CNY1.82 trillion from the previous year, according to PBOC data.

The sharp decline in new loans was mainly due to the continued downturn in the real estate market and relatively weak momentum in investment and consumption, which dampened endogenous loan demand from enterprises and households, said Wang Qing, chief macro analyst at Golden Credit Rating International.

Broad Money Growth Accelerates

At the end of last year, the M2 balance stood at CNY340.29 trillion (USD48.85 trillion), up 8.5 percent year on year, 0.5 percentage points higher than the previous month, and 1.2 percentage points higher than a year earlier. The M1 balance was CNY115.51 trillion, up 3.8 percent year on year, down 1.1 percentage points from the end of the previous month, the PBOC said.

The acceleration in M2 growth in December was mainly because rapid government bond financing was converted into enterprise and household deposits through fiscal spending, Wang Qing explained. At the same time, the full deployment of CNY500 billion in policy-based financial tools in October 2025 spurred large-scale bank lending in December and boosted deposit creation.

The ongoing adjustment in the real estate market, along with weak consumption and investment demand from enterprises and households, remains the key reason for subdued M1 growth and the widening gap between M2 and M1, Wang said, adding that this signals the need for macro policies to step up efforts to vigorously boost domestic demand.

Looking ahead, Wang Yungjin expects new social financing to reach around CNY38 trillion this year, with government bond financing maintaining rapid growth. New yuan-denominated loans are forecast at around CNY18 trillion, while M2 growth is expected to be about 8.3 percent year on year.

Editor: Emmi Laine