At the end of September, China’s M2 increased by 6.8% year-on-year. Experts said the growth rate has stabilized and picked up.

On October 14, the People’s Bank of China released data showing that by the end of September, the broad money supply (M2) stood at 309.48 trillion yuan, marking a year-on-year increase of 6.8%. Conversely, the narrow money supply (M1) decreased by 7.4% to 62.82 trillion yuan. The amount of cash in circulation (M0) rose by 11.5% to 12.18 trillion yuan, while net cash injections for the first three quarters reached 838.6 billion yuan.

In terms of lending, the total amount of renminbi loans increased by 16.02 trillion yuan during the same period. Breaking this down by sector, household loans rose by 1.94 trillion yuan, loans to enterprises increased by 13.46 trillion yuan, and loans to non-bank financial institutions saw a smaller rise of 188.7 billion yuan.

Market experts attribute the stabilization and recovery of M2 growth to a combination of factors. They note that the recent implementation of a suite of incremental policies has provided significant support for restoring market confidence, particularly as liquidity has returned to deposits from wealth management products, contributing to the overall increase in money supply. There is a prevailing belief that the effects of these policies will become more pronounced and that financial metrics are set to grow steadily in the near future.

Liang Si, a researcher at the Bank of China Institute, highlights that the year-on-year decrease in the scale of new credit issuance may impact M2 growth. He notes a divergence is occurring, as M2 shows an upward trend while new lending remains subdued. This is largely due to improved market expectations and heightened investor enthusiasm in late September, prompting substantial funds to flow from wealth management products into securities accounts, which has provided some support for M2.

Liang also points out that the market widely anticipates an acceleration in the rollout of recent incremental policies, which will effectively boost the funding needs of economic entities. He suggests that as various policies are gradually implemented in the fourth quarter, corresponding financial resources will align, leading to a steady increase in credit demand. The continued acceleration of special bond issuance is expected to expand bond financing规模, with key financial indicators likely to show a temporary uptick.