Credit and Social Financing Growth Steady in February, Household Consumer Demand Awaiting Release

(Source: Beijing Business Daily)

On March 13, the People’s Bank of China (PBOC) timely released the financial statistics report for February 2026. Overall, new credit in February decreased month-on-month and grew less year-on-year; however, under the continued implementation of various policies, coordinated fiscal and monetary efforts to stabilize growth, credit growth remained relatively steady. With government bond issuance front-loaded and efforts intensified, the growth rate of social financing continued at 8.2%. Meanwhile, driven by accelerated fiscal spending, increased inflows of foreign capital, and monetary activation, the growth rates of M2 and M1 continued to stay high.

Analysts believe that there may be one interest rate cut in the second and fourth quarters, but compared to aggregate tools, the scope for structural policy tools might be greater. Targeted support policies should be introduced for key areas such as the real estate market and household consumption.

Credit Structure: “Strong for Enterprises, Weak for Residents”

Data shows that by the end of February, RMB loans totaled 277.52 trillion yuan, up 6% year-on-year. In the first two months, RMB loans increased by 5.61 trillion yuan. By sector, household loans decreased by 194.2 billion yuan, with short-term loans down by 359.6 billion yuan and medium- and long-term loans up by 165.4 billion yuan; corporate (enterprise) loans increased by 5.94 trillion yuan, with short-term loans up by 2.65 trillion yuan and medium- and long-term loans up by 4.07 trillion yuan, while bill financing decreased by 908.9 billion yuan; loans to non-bank financial institutions decreased by 198.7 billion yuan.

Based on these monthly figures, new RMB loans in February totaled 900 billion yuan, a decrease of 110 billion yuan compared to the same period last year. However, excluding non-bank loans, loans directed toward the real economy increased year-on-year, indicating that support for the real economy through credit remains stable.

According to Wang Qing, Chief Macroeconomist at Dongfang Jincheng, the structure of new loans in February shows a clear “strong for enterprises, weak for residents” pattern. Enterprise loans increased by 450 billion yuan year-on-year, with short-term and medium- and long-term enterprise loans rising by 270 billion yuan and 350 billion yuan respectively, while bill financing decreased by 2.043 trillion yuan. The main reasons include proactive fiscal policies earlier in the year, large-scale issuance of government bonds at the start of the year, and the gradual implementation of 500 billion yuan in new policy-based financial instruments launched in Q4 last year, which have boosted investment and stimulated related loan demand. Additionally, exports have surged this year, reducing trade policy uncertainties, and restoring confidence in production and investment among export companies. Furthermore, on January 15, the PBOC lowered the rate on structural policy tools by 0.25 percentage points, encouraging banks to increase lending to key sectors through market-based mechanisms, which may also explain the increase in enterprise loans and the substitution effect on bill financing.

Wang Qing believes that the decline in resident loans is mainly due to ongoing adjustments in the real estate market, as well as weak individual business and household consumption demand. Additionally, the Chinese New Year in mid-February may have led to residents repaying loans early after year-end bonuses, which could have pulled down the February data on new resident loans.

Regarding social financing, preliminary statistics show that by the end of February 2026, the stock of social financing was 451.4 trillion yuan, up 8.2% year-on-year, maintaining the same growth rate as the previous month. New social financing amounted to 2.38 trillion yuan, a decrease of 48.4 billion yuan month-on-month but an increase of 146.9 billion yuan year-on-year.

In the first two months, net government bond financing was 2.38 trillion yuan, roughly the same as the same period last year. “This year, the government plans to implement a more proactive fiscal policy, with net financing of about 11.89 trillion yuan and a broad deficit ratio of approximately 8.1%. The large-scale bond issuance will strongly support social financing growth. Meanwhile, steady issuance of local government special bonds aligns with infrastructure project needs, and accelerated fiscal funds will further boost related financing demand,” said Wang Yunjin, Chief Financial Researcher at Guangkai Industry Research Institute. From the contribution of social financing, government bonds remain an important support for the incremental growth.

Stimulating Domestic Demand Still Requires Policy Efforts

By the end of February, broad money (M2) stood at 349.22 trillion yuan, up 9% year-on-year, unchanged from the previous month. Narrow money (M1) was 115.93 trillion yuan, up 5.9% year-on-year, an increase of 1 percentage point from last month. The “scissors difference” between M2 and M1 narrowed from 4.1 percentage points last month to 3.1 percentage points.

Wang Qing pointed out that the growth rate of M2 remains at its highest level in the past two years, mainly because of significantly increased fiscal expenditure in the month, with fiscal deposits decreasing sharply by about 1.6 trillion yuan year-on-year. This offset the impact of a 1.44 trillion yuan year-on-year decrease in non-bank deposits, helping keep M2 growth high. Recently, the M2 growth rate has remained above 8%, partly due to short-term factors, but an important reason is the high growth in government bond financing earlier, which has been converted into deposits of enterprises and residents through fiscal spending.

Regarding the change in M1 growth, Wang Qing believes that, besides the base effect from the same period last year, the main reason is the significant fiscal expenditure in the month, with some funds converted into demand deposits of enterprises and residents. Additionally, large enterprises have accelerated payments of accounts receivable from small and medium-sized enterprises, which has also increased the demand deposits of SMEs, contributing to overall growth in enterprise demand deposits.

Wen Bin, Chief Economist at China Minsheng Bank, added that in February, the RMB exchange rate continued to appreciate rapidly, with cross-border capital inflows and foreign exchange settlement demand remaining strong, further supplementing domestic liquidity. Moreover, the capital market remains active, with residents’ deposits becoming more short-term, demand-driven, and financialized, with increased holdings of fixed-income funds and market-oriented assets.

“It should be noted that ongoing adjustments in the real estate market, weak consumption and investment activities among enterprises and residents, and the transmission of monetary easing to credit easing have led to a certain gap between M2 and M1 growth. This indicates that macro policies in the future need to focus more on significantly boosting domestic demand,” Wang Qing said.

Structural Policy Tools Have Greater Operational Space

Overall, the new credit data in February remained stable, with social financing growth in the first two months maintaining a high level historically, and M2 and M1 growth rates staying high, confirming that macro policy counter-cyclicality remains strong.

Wang Yunjin stated that looking at the annual trend, as steady growth policies continue to be implemented, corporate financing demand will remain stable, and household credit is expected to gradually recover with improvements in employment and income. Social financing and credit increments will steadily increase, further supporting stable economic growth. Based on estimates, new credit in 2026 could exceed 17 trillion yuan, with credit balance growth around 6.3%; social financing increments may reach about 38 trillion yuan, with stock growth rising to approximately 8.6%; and M2 growth could stay around 8.4%.

Following the recent conclusion of the National Two Sessions, the 2026 Government Work Report emphasizes “continuing to implement moderately loose monetary policy, prioritizing stable economic growth and reasonable price increases, flexibly and efficiently using tools such as reserve requirement ratio cuts and interest rate reductions, maintaining ample liquidity, and aligning social financing scale and money supply growth with economic growth and inflation expectations.” This sets the tone for macro policy implementation throughout the year.

Wang Qing predicts that interest rate cuts could total 0.2 to 0.3 percentage points over the year, with one cut in the first half and one in the second half. This will be a key measure to guide down the financing costs for enterprises and residents, stimulating endogenous consumption and investment. Besides rate cuts, regulators will also promote banks and financial institutions to lower intermediary costs such as evaluation and guarantee fees, which are effective measures to keep financing costs for the real economy low.

In terms of quantity-based policies, there is still room for reserve requirement ratio (RRR) cuts, estimated at around 0.5 percentage points; simultaneously, the PBOC will continue to use tools like medium-term lending facilities (MLF) and reverse repurchase operations to inject medium-term liquidity into the market, along with government bond issuance and RRR cuts to provide long-term liquidity. Currently, abundant tools for quantity easing can maintain stable and ample liquidity, ensuring smooth government bond issuance and guiding financial institutions to support the real economy.

Wang Yunjin also noted that while there is room for both aggregate and price-based policy tools, rising geopolitical tensions and significant increases in international energy prices could pose substantial imported inflation pressures. Therefore, rate cuts should be approached cautiously. Compared to this, structural policy tools may have greater operational space, with further reductions in re-lending rates, expanded credit support, and targeted policies for key areas like real estate and household consumption to promote a coordinated recovery of consumption and investment.

Regarding the release of credit vitality, Wen Bin stated that based on Spring Festival consumption data, China’s residents still have considerable consumption potential. The key to expanding domestic demand is to support residents in increasing disposable income, changing expectations about future income stability, and optimizing holiday arrangements to allow people to have both money and leisure. This year, efforts will focus on stimulating residents’ endogenous consumption and promoting consumption policies, including “adding, subtracting, multiplying, and dividing” measures to encourage residents to spend confidently, willingly, and within their means. Initiatives such as income-increasing plans for urban and rural residents, issuing 250 billion yuan in ultra-long special government bonds for old-for-new consumer products, establishing 100 billion yuan in fiscal-financial coordination funds to boost domestic demand, releasing potential in service and sinking markets, and promoting spring and autumn school holidays and paid staggered leave for workers are expected to further stimulate consumer credit momentum.

Beijing Business Daily Reporter: Dong Hanxuan