China Jan new bank loans jump more than expected to record 4.9 trillion yuan

NEW bank loans in China jumped more than expected to a record 4.9 trillion yuan (S$955.9 billion) in January, as the central bank moved to shore up growth in the world’s second-biggest economy following the lifting of tough pandemic controls.

A strong rebound in credit demand will be essential to the economy’s recovery this year, after harsh Covid measures and a crisis in the property sector dragged China’s growth down to 3 per cent in 2022, one of its worst rates in nearly half a century.

January new loans more than tripled December’s tally and exceeded analysts’ expectations, according to data released by the People’s Bank of China on Friday (Feb 10).

Analysts polled by Reuters had predicted new yuan loans would jump to 4 trillion yuan in January, from 1.4 trillion yuan in the previous month and compared with the previous monthly record of 3.98 trillion yuan in January 2022.

Chinese banks tend to issue more loans monthly at the beginning of the year to get higher-quality customers and win market share, but the size of the increase spurred hopes that business and consumer confidence is rapidly improving since the antivirus curbs were abruptly lifted in December.

“China’s credit data came in stronger than expected suggesting that the credit support remains strong at the beginning of the year,” Zhou Hao, chief economist at Guotai Junan International, said in a note.

“Overall, this is a positive credit report, and is likely to help the economy to rebound significantly in the first quarter of 2023, and the next focus for the markets will be the post-festival property sales, as it is highly correlated to bank credits.”

Analysts believe those factors, along with robust infrastructure spending and supportive policy measures, could boost economic growth to around 5 per cent this year, even with a weaker global backdrop. But they warn the recovery could be uneven, requiring policy to remain supportive.

Household loans, mostly mortgages, rose to 257.2 billion yuan in January from 175.3 billion yuan in December, while corporate loans soared to 4.68 trillion yuan from 1.26 trillion yuan.

SEE ALSO

China’s rapid Covid reopening tests PBOC’s easing path

China’s new household deposits rose to 6.2 trillion yuan in January from 2.88 trillion yuan in December. Analysts are closely watching that figure for signs that shell-shocked consumers are spending again after a year of lockdowns and job losses battered sentiment.

Broad M2 money supply in January grew 12.6 per cent from a year earlier, central bank data showed, above estimates of 11.6 per cent forecast in the Reuters poll. It rose 11.8 per cent in December.

Outstanding yuan loan grew 11.3 per cent from a year earlier compared with 11.1 per cent growth in December. Analysts had expected 11.0 per cent growth.

The central bank has promised to make its policy “precise and forceful” this year to support the economy, keeping liquidity reasonably ample and lowering funding costs for businesses.

Analysts polled by Reuters expect the central bank to cut the benchmark lending rate – the one-year loan prime rate(LPR) – by another 5 basis points (bps) in the first quarter, and it is expected to offer more targeted support measures for sectors which are struggling the most.

Some analysts are also expecting more cuts in banks’ reserve ratios (RRR) this year after two reductions last year, the latest in December.

Year-on-year growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 9.4 per cent in January from 9.6 per cent in December.

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.

Corporate and government bond issuance picked up last month, some market watchers said.

In January, TSF jumped to 5.98 trillion yuan from 1.31 trillion yuan in December. Analysts polled by Reuters had expected January TSF of 5.40 trillion yuan. REUTERS