China credit slowdown ‘happening faster than expected’ even as bank loans rose unexpectedly in May
- Banks extended 1.5 trillion yuan (US$235 billion) in new yuan loans in May, up from 1.47 trillion yuan in April and beating analysts’ expectations of 1.41 trillion yuan
- Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 11 per cent in May, the weakest pace since February 2020
China’s new bank loans unexpectedly rose in May from the previous month but broader credit growth continued to slow, as the central bank seeks to contain rising debt in the world’s second-largest economy.
Top Chinese leaders have repeatedly vowed to avoid any sharp policy turns, keeping borrowing costs low and telling banks to maintain support for small firms, while being more watchful about extending credit to hot areas of the economy such as property.
“The peak of the credit cycle must have passed, but the downward slope seems to be smoother than expected,” said Luo Yunong, fixed income analyst at Industrial Securities.
Chinese banks extended 1.5 trillion yuan (US$235 billion) in new yuan loans in May, up from 1.47 trillion yuan in April and beating analysts’ expectations of 1.41 trillion yuan, according to data released by the People’s Bank of China (PBOC) on Thursday.
The tally also was higher than the 1.48 trillion yuan issued the same month a year earlier, when policymakers rolled out unprecedented measures to deal with the shock from the coronavirus crisis.
Loans to households surged to 623.2 billion yuan in May from 528.3 billion yuan in April, while corporate loans rose to 805.7 billion yuan last month from April’s 755.2 billion yuan.
As expected, growth in outstanding yuan loans eased to 12.2 per cent year on year, the slowest pace since February 2020, and compared with 12.3 per cent in April. Excluding that early 2020 period, it marked the slowest growth since 2002, according to Capital Economics.