Forward-looking sights set for monetary policy

On Friday, the People's Bank of China, the central bank, released the financial statistics for January, showing that both the scale of social financing and the increase in loans reached new highs. This not only reflects the effectiveness of the country's latest monetary policy but also indicates a recovery in market demand.

In January, the increase in the scale of social financing was 7.06 trillion yuan ($972.9 billion), up by 583.3 billion yuan year-on-year. On the one hand, this was due to the rapid growth of balance sheet loans; on the other hand, it benefited from the accelerated issuance of government bonds.

In January, loans increased by 5.13 trillion yuan. The balance of inclusive small- and micro-loans at the end of January was 33.31 trillion yuan, up 12.7 percent year-on-year. The balance of medium- and long-term loans for manufacturing was 14.41 trillion yuan, up 11.4 percent year-on-year, both higher than the growth rate of all types of loans during the same period, indicating continuous optimization of the credit structure. In January, new personal housing loans amounted to 244.7 billion yuan, up by 151.9 billion yuan year-on-year, suggesting that the real estate market is stabilizing after the downturn.

The PBOC has fully utilized structural monetary policy tools to encourage financial institutions to increase credit supply to relevant fields, making financial support for the real economy more effective.

At the end of January, broad money (M2) grew by 7 percent year-on-year, with the growth rate falling by 0.3 percentage points from the previous month. It is worth noting that starting from January this year, M1 data has been published according to new statistical standards, which include individual current deposits and customer reserves of nonbank payment institutions. This change mainly reflects the significant changes in the usage scenarios and convenience of individual current deposits and payment institution reserves as mobile payments become widely adopted.

Meanwhile, the balance of customer reserves of payment institutions can be used for payment or transactions in most scenarios, meeting daily needs. Therefore, including individual current deposits and customer reserves of payment institutions in the M1 statistical scope is necessary and timely. Overall, this adjustment to the M1 statistical standard aligns with financial innovation and mobile payment trends, reflecting changes in liquidity under the current monetary and financial environment.

Of course, the adjustment of statistical standards will not change the direction of monetary policy. The moderately loose monetary policy in 2025 will be more forward-looking, effective, and precise.

21ST CENTURY BUSINESS HERALD