Industry experts say China’s M2 and total social financing (TSF) are different
statistics with distinct scopes; a faster M2 growth rate versus TSF does not by
itself indicates funds are idling in the banking system and has no clear policy
implication. They caution that deposit growth exceeds loan growth is normal
under a more diversified financing structure: historically loans were the
primary channel for deposit creation, but bonds and other instruments now
substitute for loans in creating deposits. As a result, slower loan growth amid
faster deposit or bond issuance is not anomaly. Market participants should
assess financial conditions using broader aggregates such as M2 and TSF rather
than relying solely on loan growth or loan flows.
