Improving the structure of social financing, a broad measure of funds raised by entities in the real economy, has always been a major issue in China's financial reform.

Effective control of new yuan-denominated loans and the expansion of credit bonds and trust indicate an improved structure of social financing. The process has been accelerating recently in China.

Statistics show that last year, the ratio of new yuan-denominated loans to total social financing amount was 58.22 percent. In the first 10 months of this year, the ratio fell to 55.53 percent. The ratios were 63.24 percent, 61.44 percent and 47.46 percent, in the first, second and third quarters, respectively.

In October, social financing became more active. Statistics released by the People's Bank of China (PBC) suggest that in October new yuan-denominated loans dropped to 505.2 billion yuan ($81.14 billion), a record low in the past 13 months and far less than the market expectation of 600 billion yuan ($96.36 billion), while social financing climbed to 1.29 trillion yuan ($207.17 billion). The ratio of yuan-denominated loans against social financing in October fell to a record low of 39.2 percent. Meanwhile, the proportion of trust, bill and corporate bonds rose to 40.5 percent, exceeding new yuan-denominated loans, which reflects a more balanced financing structure.

The PBC also plans to control the total new yuan-denominated loan amount between 8 trillion yuan ($1.28 trillion) to 8.5 trillion yuan ($1.37 trillion).

Spurred by deregulation and increased demand, the amount of credit bonds and trust underwent a significant rise. Market data from the Shanghai Stock Exchange show that since the beginning of this year, credit bonds—including short-term financing bills, medium-term notes and corporate bonds—have reached 2.94 trillion yuan ($472.16 billion), a sharp increase of 162.5 percent year on year.

Most of the issuers are government agencies and local enterprises in infrastructure investment like railways and expressways. The solid performance of credit bonds is based on constantly growing demand.

Since regulators have begun to loosen regulations over financial and assets management products, the demand for high-yield bonds has begun to surge.

Third-quarter figures from the China Trustee Association suggested that by September 30 the total amount of trust assets had registered 6.32 trillion yuan ($1.02 trillion), a year-on-year increase of 54 percent, hitting a record high. The size of the trust industry is almost the same as that of the insurance industry, China's second largest financial industry with a total asset of 6.9 trillion yuan ($1.11 trillion).

Overdependence on bank credit may lead to narrow channels of investment and financing, which will not only hinder the spread of risks, but also reduce the efficiency of capital utilization.

China's financial reform should focus on boosting the proportion of bonds, stocks and trust against social financing and enriching the sources of investment and financing.

For now, improving the structure of social financing is speeding up. As financial reform continues to deepen, deregulations accompanying the upgrading of financial innovation and the release of investment and financing demands will sustain the accelerated diversification of social financing.

This is an edited excerpt of a report by Anbound, a Beijing-based research company, published on the website of Caijing Magazine