UPDATE 1-China April bank loans tumble more than expected, raise pressure on c.bank

Reuters · 05/11/2023 09:12
UPDATE 1-China April bank loans tumble more than expected, raise pressure on c.bank

Adds details, analyst comment

March loans 718.8 bln yuan vs f'cast 1.4 trln yuan

March M2 money supply +12.4% y/y, vs f'cast of +12.5%

March TSF 1.22 trln yuan, vs f'cast 2 trln yuan

Adds to worries that economic recovery is losing steam

- New Chinese bank loans tumbled far more sharply than expected in April, adding to worries that the economy's post-pandemic recovery is losing steam and putting pressure on the central bank to ease policy.

Chinese banks extended 718.8 billion yuan ($103.99 billion) in yuan loans in April, less than a fifth of March's tally and just over half of the amount expected by analysts, data from the People's Bank of China (PBOC) showed on Thursday.

Analysts polled by Reuters had forecast yuan loans would fall to 1.4 trillion yuan in April, versus 3.89 trillion yuan in March. But the total was higher than 645.4 billion yuan a year earlier.

While some moderation in credit demand had been expected last month after record lending in the first quarter, the report came hours after price data showed deflationary pressures were deepening in China, and days after that the country's imports had contracted sharply, suggesting domestic demand is still frail and more stimulus may be .

"China's credit data came in well below estimates, reinforcing the concerns over the sustainability of post-COVID recovery," said Zhou Hao, economist at Guotai Junan International.

"Both aggregate financing and loans were only half of the market expectations, suggesting that the first wave of post-COVID recovery has more or less faded."

Dashing investors' hopes for a speedy rebound, a recovery in the world's second-largest economy from three years of pandemic lockdowns has been gradual and uneven, with consumption, especially services spending, faring better than the factory and property sectors.

To spur credit growth, the central bank in March cut banks' reserve requirement ratio (RRR) for the first time this year.

The PBOC, caught between an "atypical deflation" cycle and strong credit growth, has limited room to ease policy, even as anticipation over an end to the Federal Reserve's interest rate hikes eases fears about capital outflows.

In April, a PBOC official said there was
for any long-term deflation.

Household loans, mostly mortgages, contracted by 241.1 billion yuan in April, compared with 1.24 trillion yuan in March, while corporate loans slid to 683.9 billion yuan last month from 2.7 trillion yuan in March.

Broad M2 money supply grew 12.4% in April from a year earlier, central bank data showed, falling short of the Reuters poll estimate of 12.5%. M2 rose 12.7% in March.

Outstanding yuan loans grew 11.8% in April from a year earlier compared with 11.8% growth the previous month. Analysts had predicted 12% growth.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, was at 10% in April, unchanged from March.

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 April, TSF fell to 1.22 trillion yuan from 5.38 trillion yuan in March. Analysts polled by Reuters had expected March TSF of 2 trillion yuan.

(Reporting by Qiaoyi Li, Judy Hua and Kevin Yao; Editing by Kim Coghill)