Mainland bank lending down sharply in April
Mainland bank lending tumbled last month, reflecting weakening investment sentiment, partly reflecting slowing demand.
But the jury is still out on when the government may ease monetary policy to help the world's second biggest economy.
New loans by the big four banks totalled 101.7 billion yuan (HK$125 billion) as of April 25, and total bank loans increased only 700 billion yuan, according to China Securities Journal. This compared with 1.01 trillion yuan in new loans among all mainland banks in March, the highest since January 2011.
Analysts said lending for the whole of April could fall as much as 30 per cent from March, adding that second quarter economic growth could slow further unless the government eased policy significantly.
A spike in March lending was a one-off, with new lending mostly coming from the household sector in the form of short-term financing, and not for investment, said Joy Yang, chief China economist at Mirae Asset Securities.
Investment sentiment in China was weak in the first quarter despite the March rise, which failed to lift industrial investment on the mainland, said Tao Dong, an economist at Credit Suisse.
'We believe that there is a sea change in China. The constraints to growth have shifted from policy restrictions to demand limitation,' he said.
Analysts said the slowing loan growth in recent months mainly stemmed from the fact that large state-owned enterprises suffered from weak demand, and small and medium-sized enterprises (SMEs), which needed money, could not access bank loans.
But Sheng Nan, a senior analyst at CCB International, said many companies believed China's lending rates could drop when the government tried to stimulate the economy. Some analysts said more ambitious policy easing would start around mid-year to support growth.
'This is because 2012 is the political transition year, and growth is the priority target,' said Yang, of Mirae Asset Securities.
'If policy easing does not start around mid-year, we'll possibly revise downward our current annual GDP forecast of 8.5 per cent.'
Bank lending is under the spotlight in China, particularly after last year when many smaller companies were squeezed by rising costs just when they were cut off from bank credit, leading to bankruptcies and arguably a deterioration in the real economy.
Chinese banks lent about 2.5 trillion yuan in the first quarter, slightly beating market estimations of 2.4 trillion yuan and above the 2.2 trillion yuan seen in the same period last year.
The target loan growth is about this many trillion yuan this year, based on economists' average estimations