Solid monetary policy is effective in supporting China's economy to remain stable in the first half of 2023, the People's Bank of China (PBOC) said at a press conference on Friday.

Earlier in the year, China announced plans to promote its real economy by providing financial support in 2023. Experts told China Media Group (CMG) that the financial data for the first half of the year shows that the real economy has been strongly supported and China's business confidence has recovered.

Sufficient money supply

PBOC cut the reserve requirement ratio (RRR) by 0.25 percentage point in March to retain appropriate levels of liquidity and keep credit supply moderate.

China's new yuan-denominated loans totaled 15.73 trillion yuan ($2.2 trillion) in the first half of 2023, according to PBOC.

Data shows that the financial sector is able to better meet the needs of the real economy, and that market liquidity is reasonably abundant, according to Guan Tao, global chief economist at BOC International (China).

Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company Limited, said average rates of both business and consumer loans appear to be downward trending.

Funds flow to priority areas

In the first half, outstanding medium and long-term loans in the manufacturing sector surged 40.3 percent year on year, a growth of 10.7 percentage points higher compared to last year.

Wen Bin, chief economist at China Minsheng Bank, said the credit support for the manufacturing industry is obvious and substantial for boosting investment.The PBOC also ramped up support for key areas and weak links such as inclusive finance, green development, sci-tech innovation and infrastructure construction.

Dong said the central bank has created a total of 17 structural monetary policy tools to ensure that funds are directed to areas that need support.

Recovery of confidence

Outstanding medium and long-term infrastructure loans grew by 15.8 percent, picking up 3.3 percentage points from last year, according to PBOC.

Medium and long-term business loans grew quickly, reflecting the confidence of enterprises toward the future, said Wen.

Nearly 85 percent of new yuan-denominated loans came from enterprises and public institutions, indicating that the demand for financing is recovering alongside the implementation of policies, said Dong.

(Cover image via CFP)