The new rules introduced by the Chinese government in recent months aimed at restricting sources of debt financing seem to be taking effect, as total social financing fell considerably during May, according to data from the People’s Bank of China released Tuesday.
Total Social Financing, or TSF, came in at RMB 761 billion ($119 billion) last month, the lowest posting for almost two years. Analysts have pointed to a precipitous decline in bond financing, and particularly shadow banking, as the primary cause.
In terms of growth, this means that May’s increase in TSF slowed to 10.3% year-on-year from 10.5% in April amid the tighter monetary conditions and regulations. Asset management products have been hit with new rules to break implicit guarantees, stem the growth of non-standardised debt assets, and bring more activity onto the balance sheet.
Whilst bank lending grew by 38%, off-balance-sheet lending, namely entrusted loans, trust loans and bank acceptance bills, fell by RMB 421.5 billion in May. Corporate bond financing also fell RMB 43 billion, the largest drop in 12 months.