New bank lending in China rose more than expected in March, while broad credit growth accelerated, from the previous month as the central bank kept policy accommodative to support the slowing economy. Chinese banks extended 3.13 trillion yuan (US$492 billion) in new yuan loans in March, up sharply from February and exceeding analyst expectations, data released by the People’s Bank of China (PBOC) on Monday showed. Analysts polled by Reuters had predicted new yuan loans would rise to 2.68 trillion yuan in March. The new loans were higher than 2.73 trillion yuan a year earlier. That pushed bank lending in the first quarter to a record of 8.34 trillion yuan (US$1.3 trillion), up 8.7 per cent from 7.67 trillion yuan in the first quarter of 2021 – the previous record. Bank loans and total social financing rose more than expected in March. This confirms that the government did loosen monetary policy Zhang Zhiwei “Bank loans and total social financing rose more than expected in March. This confirms that the government did loosen monetary policy,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management. “Strong credit supply is helpful, but the economy will likely stay weak with many cities under lockdown. The outlook of the Covid outbreaks and the zero [Covid] tolerance policy are the most important uncertainty the economy faces.” Household loans, mostly mortgages, rose to 753.9 billion yuan in March, after contracting by 336.9 billion yuan in February, while corporate loans jumped to 2.48 trillion yuan last month from 1.24 trillion yuan in February. China’s cabinet last week held out the prospect of more measures to support the economy under pressure from renewed coronavirus outbreaks and a slowing global recovery. China’s forex assets could ‘turn to zero’ if US imposes sanctions To spur growth, the central bank has cut interest rates and banks’ reserve requirement ratio, with more easing steps expected. Broad M2 money supply grew by 9.7 per cent from a year earlier, central bank data showed, above estimates of 9.2 per cent forecast in the Reuters poll. M2 grew by 9.2 per cent in February from a year ago. Outstanding yuan loans grew by 11.4 per cent from a year earlier compared with 11.4 per cent growth in March. Analysts had expected 11.4 per cent growth. China’s forex reserves fall US$26 billion amid ongoing capital outflows Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 10.6 per cent in March from a year earlier and from 10.2 per cent in February. 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 March, TSF rose sharply to 4.65 trillion yuan from 1.19 trillion yuan in February. Analysts polled by Reuters had expected March TSF of 3.7 trillion yuan. Credit growth will probably continue to accelerate in the coming months amid declines in borrowing costs and support to the housing market. We think policy easing will continue in the near-term Sheana Yue “Broad credit growth was much stronger than expected last month amid increased policy support. With more easing on the horizon, we expect a further acceleration although a sharp pickup in lending still seems unlikely,” said Sheana Yue, China economist at Capital Economics. “Credit growth will probably continue to accelerate in the coming months amid declines in borrowing costs and support to the housing market. We think policy easing will continue in the near-term. “The next public easing measure could come as soon as this Friday, when we expect the PBOC to cut the rate on its medium-term lending facility by 10 basis points. That said, we do not expect a sharp rebound. Policymakers still appear keen to balance their desire to soften the economic downturn with their concerns over high debt levels.” ‘Triad of shocks threaten to undermine growth momentum’ Yue, though, pointed to the highly seasonal nature of the figures as they “always pick up in March”. “As such, the year-on-year change in the outstanding amounts is a better guide to the underlying trend. On this basis, bank loan growth held steady at 11.4 per cent year on year,” she added. “Meanwhile year-on-year growth in nonbank borrowing picked up, led by stronger issuance of corporate and government bonds. All told, broad credit growth rebounded from 10.2 per cent year on year, to an eight-month high of 10.6 per cent.”