The financial landscape is on the verge of transformation as we gear up for the first data release of 2025 in JanuaryIndustry experts point out that this month is traditionally seen as a robust period for credit expansion, often paving the way for a promising start to the yearThe current monetary policy remains moderately accommodative, aiming to create a conducive environment for stable economic growthThis strategic approach is designed to effectively guide financial institutions in enhancing their support towards key areas and weak links within the real economy, ensuring that the overall financial metrics continue to grow at a reasonable pace.

There is a noteworthy underpinning in the demand for creditAccording to experts, the push for high-quality development in finance necessitates a careful balance in credit scale, projected to see a significant month-on-month increase in January, albeit with a slight decrease compared to the previous year's figures

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A report from the National Economic Research Center of Peking University sheds light on this, suggesting that the concerted efforts of fiscal and monetary policies will bolster credit demandFurthermore, the continuous optimization of real estate policies is also expected to provide additional support to the new credit influx.

One of the key indicators of credit demand and deployment is the fluctuation in the rate of bank note discountingLiao Zhiming, the chief fixed-income analyst at Huayuan Securities, notes that towards the end of January, the discount rate for one-month bank notes is anticipated to surpass 2%. This indicates a strong credit release within the monthBuoyed by the notion of "early investment leads to early benefits," banks are likely to prioritize lending at the beginning of the year, suggesting a credit distribution rhythm akin to the "4321" model throughout the year.

Estimates on the scale of new credit issuance put January's figures between 4.5 trillion to 5 trillion yuan, closely mirroring the levels seen at the beginning of 2024. Analyst Lin Yingqi from CICC highlights that the new credit is expected to be predominantly directed towards infrastructure projects, high-tech manufacturing, and green loans aimed at corporate clients.

Meanwhile, combining predictions for new credit issuance, Lu Zhengwei, the chief economist at Industrial Bank, anticipates that the social financing scale will reach approximately 6.4 trillion yuan in January

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From the perspective of government bonds, the issuance of these bonds is expected to accelerate in the first quarter of 2025 compared to the same period in the previous year, leading to an anticipated increase in the financing scale of government bonds in January.

In another significant development, the People's Bank of China (PBOC) has announced a revised approach to calculating M1 from January onwardsThis updated methodology aligns better with economic growth indicatorsExperts foresee that the new calculation will result in a more stable trajectory in the year-on-year growth rate of M1. Wang Yifeng, the chief analyst of the financial sector at Everbright Securities, asserts that by integrating personal demand deposits into M1, the seasonal fluctuations typically affecting M1 due to the interplay between corporate and retail banking during the Chinese New Year will be mitigated, thus reducing overall volatility.

Liao Zhiming further projects a positive growth trend for the newly defined M1 in January

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At the close of December 2024, the M1 under the old methodology stood at 67.1 trillion yuan, whereas under the revised parameters, M1 is anticipated to reach 110.9 trillion yuan"While the growth rates of both old and new M1 metrics have shown close patterns in recent years, the newly defined M1 will exhibit a much steadier year-on-year growth rateWe predict a growth of 1.2% under the new definition while the old measure could reflect a decline of -5.7%," says Liao.

On the M2 front, industry insights suggest that its year-on-year growth rate will remain relatively stableThe National Economic Research Center's report indicates that an environment of moderately relaxed monetary policy and constantly optimized real estate policies, coupled with a declining comparison base and the influence of the Spring Festival, will collectively support the year-on-year growth rate of M2.

A critical objective for 2025 outlined by the PBOC is to ensure "ample liquidity and stable growth in financial totals.” Achieving stability in financial metrics is essential in providing strong support for the anticipated resurgence and improvement within the real economy

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Experts assert that as various policies come into effect, the demand for effective financing is expected to improve furtherThis will enable financial resources to flow toward significant strategies, key sectors, and areas needing bolstering, thereby jointly endorsing a sustained and reasonable growth in financial totals.

The vice-governor of the People's Bank of China, Xuan Changneng, recently articulated that future macroeconomic policies will focus on enhancing counter-cyclical adjustmentsHe emphasized the necessity to fine-tune and optimize policy intensity and tempo at opportune moments, in tune with the economic conditions domestically and internationally, and align with the operational dynamics of financial markets to support the fulfillment of annual economic and social development goals.

According to Ming Ming, the chief economist at CITIC Securities, there's a vital need to maintain a balance between short-term and long-term factors impacting economic operations