China's financial sector has made notable advancements in bolstering the real economy with improved quality and efficiency, signaling a strategic shift toward high-quality development, according to a comprehensive review published by Xinhua News Agency on Sunday.

A virtuous cycle is forming between finance and the real economy

The report highlights a progressively strengthening symbiosis between finance and the real economy, boasting the world's largest banking system and the second-largest insurance, stock, and bond markets globally.

These financial systems provide robust support for the long-term stable and healthy development of China's economy and society.

A testament to this growth is the surge in RMB loans issued by the People's Bank of China (PBOC), which has soared from 81.43 trillion yuan ($11.13 trillion) in 2014 to a staggering 230 trillion yuan as of September 2023. The annual growth rate has been maintained at over 10 percent, in step with the nominal GDP growth rate.

Direct financing channels also continue to improve. The bond market in China has seen a phenomenal rise, now boasting a custodial balance exceeding 150 trillion yuan, up from less than 30 trillion yuan in 2012.

"This reflects the high-quality development of our real economy, with nearly 2900 out of more than 5200 A-share listed companies belonging to strategic emerging industries," commented Sun Nianrui, vice president of China Association for Public Companies.

Financial services for key areas and weak links have been consistently strengthened

The report by Xinhua further underscores a fortified effort to reinforce financial services in key areas and weaker sectors, such as manufacturing, technological innovation, small and micro enterprises, rural areas, and green development.

Inclusive loans to small and micro enterprises alone have reached 28.74 trillion yuan as of the end of September this year, growing at an average annual rate of about 25 percent over the past five years.

Loans geared towards environmental sustainability, extended-term manufacturing credits, financing for innovative and niche SMEs, and agricultural lending have all seen substantial year-over-year growth at rates of 36.8 percent, 38.2 percent, 18.6 percent, and 15.1 percent, respectively. These increases significantly exceed the overall growth rate for loans across the board.

The positive impact of refined monetary policy tools, which have incentivized financial institutions to better allocate credit resources, contributes to the economy's high-quality development, said Zou Lan, head of the monetary policy department at the PBOC.

The cost of financing for real economy enterprises continues to decrease

The cost of financing for real businesses has continued to decline, with the weighted average interest rate for new corporate loans reaching a historical low, the review noted.

The loan prime rate (LPR) reform has shown continuous effectiveness, gradually improving the efficiency of monetary policy transmission and leading to a significant decrease in the cost of social financing.

In September, the weighted average interest rate for new corporate loans in China was 3.85 percent, 14 basis points lower than the same period last year and at a historical low.

Financial reforms and opening up continue to deepen

These advancements underscore a deeper push towards China's financial reform and opening up, indicating a steadfast commitment to the progressive development of the financial domain in the new era.

China has showcased a more open stance in its financial market with the initiation of multiple cross-border trading linkages including the Shanghai-Hong Kong Stock Connect, Shanghai-London Stock Connect, Mainland-Hong Kong Bond Connect, and the currency swap arrangements.

Moreover, Chinese bonds have been incorporated into the world's three major bond indices. The country has also liberalized the ownership limits for foreign financial institutions and substantially expanded the business scope for foreign financial entities within China, leading to increased foreign investment.

Statistics indicate that as of the end of September this year, 202 banks from 52 countries and regions have set up branches in China and 1,110 overseas institutions were participating in the Chinese bond market, holding 3.3 trillion yuan of Chinese bonds.

Highlighting the global reach of China's financial sector, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) data reveals the Chinese yuan's rising prominence in global trade financing, at 5.8 percent and securing the second rank globally in Sept.

"China's financial market has sent a clear signal of openness to the international community, which not only promotes a more complete global financial governance system but also significantly boosts confidence in the global market," stated Li Jiange, secretary-general of the Global Asset Management Forum.