China’s new bank loans fall in May, but broader credit growth accelerates
BEIJING (Reuters) – New bank lending to China fell more than expected in May, but broader credit growth accelerated as central bank continues to ease policy to put economy back on solid footing after the coronavirus crisis.
Banks granted 1.48 trillion yuan ($ 209.47 billion) in new yuan loans in May, up from 1.70 trillion yuan in April, according to data released Wednesday by the People’s Bank of China (PBOC) .
Analysts polled by Reuters had predicted that loans would drop to 1.50 trillion yuan. But the total was over 1.18 trillion yuan in the same month last year.
Loans to households, mainly mortgages, rose to 704.3 billion yuan from 666.9 billion yuan in April, while loans to businesses fell to 845.9 billion yuan from 956.3 billion yuan. yuan.
The broad M2 money supply increased 11.1% from the previous year, below estimates of 11.3%, but in line with April’s rise.
Monthly loan numbers are very seasonal, so analysts tend to focus on year-to-year changes to gauge underlying trends. As expected, outstanding yuan loans increased 13.2% year-on-year, after 13.1% in April.
“We believe that credit growth will continue to accelerate in the coming months given loose monetary conditions, political pressure on banks to lend more and plans for a further acceleration in government borrowing,” he said. Capital Economics’ Julian Evans-Pritchard said, noting a Government bond issuance had pushed broader growth to a 21-month high.
“This should lead to a strong rebound in investment and help support economic activity in the short term. But further ahead, another round of state-led stimulus will worsen resource allocation and lead to higher debt levels. “
Pan Gongsheng, vice governor of the PBOC, said last week that the economic shock from the pandemic was greater than initially expected and more political support was needed.
The PBOC has already put in place a series of easing measures since early February, including reductions in reserve requirements and lending rates and targeted lending support for businesses affected by the virus.
Reflecting the uncertain outlook, China has set no annual growth target this year for the first time since 2002 and has pledged to increase public spending. But expectations of a global recession compound the challenges.
Premier Li Keqiang said last month that monetary policy would be more flexible and that the growth of M2 – a general indicator of money supply – and total social financing would be significantly higher.
Growth in the stock of total social finance (TAF), a general measure of credit and liquidity in the economy, accelerated to 12.5% in May from the previous year, from 12% in April.
TSF includes forms of off-balance sheet financing that exist outside the conventional bank lending system, such as initial public offerings, trust company loans, and bond sales.
In May, TSF rose to 3.19 trillion yuan from 3.09 trillion yuan in April. Analysts expected 3.00 trillion yuan.
Bond issuance drives credit growth
Analysts expect the central bank to further reduce reserve requirement ratios and bank lending rates in the coming months, although it recently unveiled more targeted tools to boost lending to small businesses.
Beijing has relied more on fiscal stimulus to weather the recession, cutting taxes and issuing local government bonds to fund infrastructure projects.
The government set the local government’s special bond issuance quota at 3.75 trillion yuan, compared to 2.15 trillion yuan.
The government will also issue 1 trillion yuan in special treasury bills this year.
Local governments issued 2.15 trillion yuan in special bonds in the first five months of this year.
Reporting by Judy Hua and Kevin Yao; Edited by Kim Coghill