China March new bank loans rise to 3.6 trillion yuan, beating expectations

[BEIJING] New bank loans in China rebounded more than expected in March from a sharp drop the month before, offering some relief to policymakers as the world’s second-largest economy braces for an escalating trade war with the US.

Chinese banks extended 3.6 trillion yuan (S$650.5 billion) in new yuan loans in March, according to Reuters calculations based on data released by the People’s Bank of China (PBOC) on Sunday (Apr 13).

Analysts polled by Reuters had predicted new yuan loans would rise to three trillion yuan last month, compared with a lower-than-expected one trillion yuan in February and 3.1 trillion yuan in the same month last year.

For the first quarter, total new loans rose to 9.8 trillion yuan from 9.5 trillion yuan in the same period last year. Outstanding yuan loans rose 7.4 per cent in March from a year earlier, up from a 7.3 per cent pace in February. Analysts had expected growth to remain steady. China is contending with deepening trade frictions sparked by US President Donald Trump’s sweeping tariffs on trading partners.

Beijing has vowed to respond in kind and showed no sign of backing down, complicating any prospects for a near-term resolution and raising the stakes for a prolonged stand-off that could further weigh on exports – one of the few bright spots in China’s uneven economy.

The tariffs will put immense pressure on China’s exporters and its broader manufacturing sector, particularly when domestic demand remains sluggish and deflationary pressures persist. Consumer and business confidence were already shaky before Trump’s re-election in November.

In a recent commentary, the state-run People’s Daily hinted at monetary policy actions ahead as Chinese officials push for an ambitious economic growth target of “around 5 per cent” this year.

“Based on the evolving situation, there is ample room for adjustment in monetary policy tools such as reserve requirement ratio cuts and interest rate reductions, which can be introduced at any time,” the newspaper said.

It also flagged the potential for further expansion of fiscal deficits, special bonds and special treasury bonds.

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Premier Li Qiang projected confidence in the economy in a call on Apr 8 with European Commission President Ursula von der Leyen, according to state news agency Xinhua, as he defended China’s countermeasures to Trump’s tariffs.

“China’s macro policy this year has taken full account of various uncertainties, and has sufficient reserve of policy tools to hedge against adverse external impacts,” Li was quoted as saying.

Broad M2 money supply grew 7 per cent in March on year, Sunday’s central bank data showed, below the 7.1 per cent forecast of analysts polled by Reuters. In February, M2 expanded 7 per cent.

The narrower M1 money supply rose 1.6 per cent year on year, compared with a 0.1 per cent growth in February.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, rose to 8.4 per cent from 8.2 per cent in February. Acceleration in government bond issuance to boost the economy could help boost growth in TSF.

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.