May 20, 2024


New bank lending in China fell more than expected in April from the previous month while broad credit growth hit a record low, the central bank revealed on Saturday, raising the prospect of more action to support the economy.


Chinese banks extended 730 billion yuan ($101 billion) in new yuan loans in April, down sharply from 3.09 trillion yuan in March and falling short of analysts’ expectations, according to the bank’s data.

 


A pull-back in April from March was widely expected, because Chinese banks tend to front-load loans at the beginning of the year to get high-quality customers and win market share.

 


Analysts polled by Reuters had predicted new loans falling to 800 billion yuan in April. The figure for the month was, however, slightly higher than 718.8 billion yuan in April 2023.

 


“New loans, social financing, and M2 [money supply] slowed down more than expected in April mainly due to seasonal factors, sluggish real estate market and lagging government bond issuance,” said Zhou Maohua, an analyst at Everbright Bank.

 


“The performance of new loans and bill financing in April shows the overall demand for financing from the real economy is relatively weak.”

The People’s Bank of China does not provide monthly breakdowns but Reuters has calculated the April figures based on the bank’s Jan-April data compared with the Jan-March figure.


New loans totalled 10.19 trillion yuan for the first four months of the year, up from 9.46 trillion yuan in the first quarter, the bank said.

 


The central bank said on Friday it will ensure reasonably ample liquidity and credit expansion to consolidate the country’s economic recovery, which still faces many challenges.

 


FRAIL DEMAND


China’s economy grew at a faster-than-expected 5.3% in the first quarter, offering some relief to officials as they try to shore up growth in the face of a property downturn and mounting local government debt.

 


However, some March indicators showed that demand at home remains frail, weighing on overall momentum.

 


China has set an economic growth target for 2024 of around 5%, which many analysts say will be a challenge to achieve as a sagging property market and tepid consumer demand weigh on the economy.

 


Household loans, mostly mortgages, contracted 516.6 billion yuan in April, compared with an increase of 940.6 billion yuan in March, according to the bank’s data and Reuters calculations.

 


Corporate loans dropped to 860 billion yuan from 2.34 trillion yuan in March.

 


Broad M2 money supply in April grew 7.2% from a year earlier, below a Reuters poll estimate of 8.3% growth. It rose 8.3% in March.


Outstanding yuan loan grew 9.6% from a year earlier compared with March’s 9.6% rise – the lowest on record. Analysts had expected 9.7% growth.

 


Annual growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 8.3% in April – a record low, from 8.7% in 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.

 


TSF showed a rare contraction of 200 billion yuan in April, versus a rise of 4.87 trillion yuan in March. Analysts polled by Reuters had expected April TSF of 1.00 trillion yuan.

First Published: May 11 2024 | 9:21 PM IST