China’s new bank loans fell in May, but broader credit growth quickened amid policy easing
- Banks extended 1.48 trillion yuan (US$209 billion) in new yuan loans in May, down from 1.70 trillion yuan in April
- Premier Li Keqiang told the National People’s Congress last month that monetary policy would be more flexible, and growth of M2 and total social financing would be significantly higher this year.
New bank lending in China fell more than expected in May from the previous month, but broader credit growth quickened as the central bank continues to ease policy to get the economy back on solid footing after the shock from the coronavirus crisis.
Analysts polled by Reuters had predicted new yuan loans would fall to 1.50 trillion yuan in May, although new loans were higher than 1.18 trillion yuan in the same month last year.
Household loans, mostly mortgages, rose to 704.3 billion yuan in May from 666.9 billion yuan in April, while corporate loans fell to 845.9 billion yuan from 956.3 billion yuan.
We think credit growth will continue to accelerate in the months ahead given loose monetary conditions, political pressure on banks to lend more and plans for a further ramp up in government borrowing
Broad M2 money supply in May grew 11.1 per cent from a year earlier, below estimates of 11.3 per cent forecast in the Reuters poll. It rose 11.1 per cent in April.
Outstanding yuan loans grew 13.2 per cent from a year earlier compared with 13.1 per cent growth in April. Analysts had expected 13.2 per cent.
“We think credit growth will continue to accelerate in the months ahead given loose monetary conditions, political pressure on banks to lend more and plans for a further ramp up in government borrowing,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
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Pan Gongsheng, vice-governor of the PBOC, said last week that the economic hit from the coronavirus pandemic was bigger than first expected and that more monetary and credit policy support was needed.
The PBOC has already rolled out a raft of easing steps since early February, including cuts in reserve requirements and lending rates and targeted lending support for virus-hit firms.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 12.5 per cent in May from a year earlier and from 12 per cent in April.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
In May, TSF rose to 3.19 trillion yuan from 3.09 trillion yuan in April. Analysts polled by Reuters had expected 3 trillion yuan.
