Coronavirus: China claims stimulus ‘10 times more efficient’ than US Fed, as new loans top US$1 trillion

New loans in China topped US$1 trillion in the first three months of the year, but People’s Bank stops short of all-out stimulus

Central banker told press conference in Beijing that China’s monetary response ‘10 times’ more efficient than US Federal Reserve

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New bank loans in China totalled 7.1 trillion yuan (US$1.01 trillion) in the first quarter of 2020, a large increase from 5.81 trillion yuan for the same period last year, according to central bank data. Photo: AP

Published: 6:46pm, 10 Apr 2020Updated: 9:17am, 11 Apr 2020

Chinese banks pumped more than US$1 trillion into the economy in the first quarter of the year, in an effort to stem the bleeding from the coronavirus pandemic.

Quarterly lending reached an all-time high, even as the People’s Bank of China showed no intention of following the US Federal Reserve’s gung ho stimulus playbook, favouring targeted rate cuts and liquidity injections instead.

Instead, at a press conference in Beijing on Friday, a senior central banker claimed China’s targeted approach was “10 time more efficient than Washington’s”.

“China’s efficiency is 10 times that of the Fed. Each yuan injected into the money supply generated 3.5 yuan worth of bank loans,” said Sun Guofeng, director general of monetary policy at the PBOC, claiming that the US had injected US$1.6 trillion in liquidity into its banking system, resulting in just US$500 billion of new loans.

Sun said the interest rate on US commercial paper, viewed as the real interest rate for businesses, fell by only 0.17 percentage points, suggesting Fed rate cuts are not as effective as they might seem.

His comments come at a time when the central bank is being criticised of not doing enough to help the Chinese economy, especially in refraining from benchmark interest rate cuts.

New bank loans in China totalled 7.1 trillion yuan (US$1.01 trillion) in the first quarter of 2020, a large increase from 5.81 trillion yuan for the same period last year, according to central bank data.

Bank lending was 2.85 trillion yuan (US$410 billion) in March, well above the Bloomberg median estimate of 1.8 trillion yuan and February’s new lending of 905.7 billion yuan.