Shenwan Hongyuan: February Financial Data Review - Is the Optimization of the Credit Structure Sustainable?

Summary

Event: On March 13, the People’s Bank of China released financial data for February 2026. The year-over-year growth rate of total credit balance decreased by 0.1 percentage points to 6.0%, social financing stock remained flat at 8.2%, and M1 increased by 1.0 percentage point to 5.9%.

Key Point: The sustainability of medium- and long-term corporate loans still needs observation.

In February, the year-over-year improvement in corporate medium- and long-term loans may be due to two main factors: first, a more balanced pace of credit issuance in January; second, the low base effect created by early debt reduction efforts at the beginning of last year. The new credit added in February was 110 billion yuan less than the same period last year, mainly due to slower growth in resident loans and non-bank loans, which dragged down the overall. Meanwhile, corporate medium- and long-term loans increased by 350 billion yuan year-over-year. The sustainability of future growth in these loans depends on the recovery rate of demand and the speed of upstream cost increases.

Social financing increased year-over-year for two consecutive months at the start of the year, with the core supporting items shifting from government bonds in January to RMB loans in February. In February, social financing increased by 146.1 billion yuan year-over-year, with RMB loans accounting for a main increase of 195.6 billion yuan. The government bonds that supported social financing in January saw a decrease of 290.3 billion yuan in February, mainly due to the high base effect from February 2025. The net financing of government bonds within the 2026 budget is limited, and its support for social financing growth may weaken in the future.

M1 continued to improve, partly due to the offsetting effect of residents’ demand deposits during the shifted Chinese New Year holiday, combined with stronger-than-expected holiday consumption, which further amplified this effect. Historically, during the Chinese New Year month, residents’ demand deposits tend to rise, related to off-balance sheet asset revaluation and year-end bonuses paid to enterprises. The delayed Chinese New Year in 2026 and the surge in holiday consumption likely made the growth of residents’ demand deposits a key driver of M1 improvement. M2 growth remained stable, mainly benefiting from increased fiscal expenditure and a significant decline in fiscal deposits.

Looking ahead, monetary policy will become more flexible and efficient, likely introducing incremental measures aligned with economic conditions. The government work report explicitly states the flexible and effective use of tools such as reserve requirement ratio cuts and interest rate reductions to maintain ample liquidity, optimize structural monetary policy tools, and signal that monetary policy will be timely in smoothing economic fluctuations. Currently, volatile commodity prices have yet to fully impact the economy, and policymakers are expected to continue monitoring the situation, increasing support when appropriate to ensure macroeconomic stability.

Routine Monitoring: Social Financing Year-over-Year Increase

In February, new credit was 900 billion yuan, 110 billion yuan less than the same period last year. Resident sector loans decreased by 651.7 billion yuan year-over-year, with short-term loans down by 195.2 billion yuan and medium- to long-term loans down by 66.5 billion yuan. Corporate loans increased by 1.49 trillion yuan, with bill financing down by 204.3 billion yuan, short-term loans up by 270 billion yuan, and medium- to long-term loans up by 350 billion yuan.

In February, social financing increased by 2.3792 trillion yuan year-over-year, mainly driven by RMB loans, which increased by 848.4 billion yuan. Government bonds increased by 1.4036 trillion yuan, but this was 290.3 billion yuan less than the same period last year, affected by the high base from February 2025. The net financing of government bonds within the 2026 budget is limited, and its support for social financing growth may weaken temporarily.

M2 growth remained steady at 9.0%, while the new M1 increased by 1.0 percentage point to 5.9%. In deposit structure, residents’ deposits increased by 2.5 trillion yuan year-over-year, corporate deposits decreased by 1.76 trillion yuan, fiscal deposits decreased by 1.61 trillion yuan, and non-bank deposits increased by 1.39 trillion yuan, down 1.44 trillion yuan from the previous year.

Risk Warning

1. Uncertainty in policy response models and transmission mechanisms.

2. Structural changes in the economy may lead to different policy transmission effects, affecting the direction and scale of policies in 2026.

(Source: Shenwan Hongyuan)