China's credit expansion accelerated in May 2025, driven by proactive fiscal policies and a surge in government bond issuance, according to data released by the People's Bank of China. New yuan-denominated loans reached 10.68 trillion yuan ($1.5 trillion) in the first five months of the year, signaling renewed momentum in financial support for economic growth.
Money Supply and Social Financing Climb
The broad M2 money supply rose 7.9% year-on-year to 325.78 trillion yuan by May's end, while the total social financing stock—a key indicator of credit and liquidity—grew 8.7% to 426.16 trillion yuan. Analysts attribute this growth to accelerated government bond sales, with net financing exceeding 3.8 trillion yuan in Q1 alone.
Fiscal Policies Drive Momentum
Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co., Ltd., noted that local government special bond issuance hit annual highs in May. 'Proactive fiscal measures are stabilizing market confidence and supporting targeted sectors,' he said. Corporate loans saw a significant boost, rising to 9.8 trillion yuan, while household loans increased by 572.4 billion yuan during the same period.
Economic Implications
The M1 money supply, reflecting short-term liquidity, grew 2.3% to 108.91 trillion yuan. This uptick suggests improved business activity and consumer transactions. The data underscores China's strategic focus on balancing monetary easing with structural reforms to sustain recovery in key industries.
