China economy: new bank loans in February fall less than expected, as ‘real financing demand is very strong’
- New loans total 1.36 trillion yuan (US$209 billion), surpassing analysts’ forecasts for 950 billion yuan
- February M2 money supply growth accelerates to 10.1 per cent from a year earlier, well above forecast for 9.4 per cent
New bank lending in China fell less than expected in February from January amid efforts by the central bank to cool credit growth to contain debt risks while maintaining support for ailing small firms.
Analysts polled by Reuters had predicted 950 billion yuan worth of new yuan loans in February, compared with 905.7 billion yuan a year earlier.
“Credit supply was stronger than expected,” Industrial Securities analyst Luo Yunong said. “The central bank has tightened credit at the margin, but real financing demand is very strong.”
Last year, the central bank rolled out a raft of measures including cuts in interest rates to support the coronavirus-hit economy. But the PBOC has kept its benchmark lending rate, the loan prime rate, unchanged since May.
China’s regulators have told banks to trim their loan books this year to guard against asset bubble risks, banking sources said.
Broad M2 money supply in February grew 10.1 per cent from a year earlier, central bank data also showed – above the forecast of 9.4 per cent in a Reuters poll. It rose 9.4 per cent in January.
Outstanding yuan loans grew 12.9 per cent from a year earlier compared with 12.7 per cent growth in January. Analysts had expected 12.7 per cent growth.
“This was entirely driven by faster lending to households,” Julian Evans-Pritchard, senior China economist with Capital Economics, said in a note on Wednesday.
We suspect that the latest uptick in lending is just a blip, and that broad credit growth will resume its downward trajectory before long
Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 13.3 per cent in February from 13 per cent in January. Analysts expect that growth rate to slow to about 11 per cent at the end of 2021.
“Looking ahead, we suspect that the latest uptick in lending is just a blip, and that broad credit growth will resume its downward trajectory before long,” Evans-Pritchard said.
TSF includes off-balance sheet forms of financing outside the conventional bank lending system, such as initial public stock offerings, loans from trust companies and bond sales.
In February, TSF fell to 1.71 trillion yuan from 5.17 trillion in January. Analysts polled by Reuters had expected February TSF to be 950 billion yuan.
