Morgan Stanley: Steady February Loan Growth and Healthy M1 Growth in China
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Morgan Stanley highlights steady trends in February 2026 Chinese financial data, noting that Total Social Financing (TSF) growth remained flat at 8.2% year-over-year, while RMB loan growth stabilized at approximately 6%. Government bond growth remained robust at 16.6%. Medium and long-term corporate loans served as the primary support for overall credit expansion, whereas retail loans continued to show weakness, consistent with expectations.
Government bond net issuance reached RMB 1.4 trillion in February. Although this represented a year-over-year decline due to a later Lunar New Year, it still increased sequentially. Meanwhile, household deposit growth rebounded from 7.2% in January to 8.8% in February. However, this remains below the 10%-plus levels seen in 2025, suggesting a gradual shift of new savings into other financial products such as insurance.
The firm views the rise in M1 growth to 5.9% as an encouraging sign of healthy and rational corporate activity. M2 growth held steady at 9.0%. Net discount bill issuance declined in February, indicating reduced reliance on bills to inflate loan volumes. Morgan Stanley concludes that infrastructure lending will continue providing crucial downside support for loan growth throughout the year, though retail loan drags are likely to persist.