April new loans increase but shadow lending shrinks

Chinese banks extended 1.18 trillion yuan ($186.37 billion) in net new yuan loans in April, up slightly from March and higher than expectations, as policymakers look to support the economy as it faces fresh risks from US trade threats.

Friday’s credit data also showed Chinese regulators are continuing to make progress in their campaign to clamp down on riskier lending practices and shadow banking in the world’s second-largest economy.

Analysts polled by Reuters had seen new yuan loans of 1.1 trillion yuan, down slightly from March’s 1.12 trillion yuan.

“The upshot is that the ongoing regulatory crackdown and past monetary tightening remain a drag on credit growth. There are signs that the policy stance is now shifting,” Julian Evans-Pritchard from Capital Economics said in a note.

“Policymakers are discussing possible steps to support domestic demand and the People’s Bank of China [the country’s central bank] has guided market interest rates lower since the start of the year. However, it will take a few quarters for any loosening of monetary policy to drive a turnaround in credit growth,” Evans-Pritchard added.

Banks extended 6.04 trillion yuan in the first four months of the year, up 13.5 percent from the same period last year.

The latest data showed corporate and personal demand for credit remained relatively solid in April, auguring well for continued resilience in the world’s second-largest economy.

Corporate loans rose to 572.6 billion yuan in April from 565.3 billion yuan a month earlier, while household loans, mostly mortgages, fell to 528.4 billion yuan in April from 580 billion yuan in March, according to central bank data.

Chinese banks’ loan books have also improved in recent months as regulators force them to bring socalled “non standard” assets onto their balance sheets to improve transparency. Those assets are often riskier products linked to shadow banking.

Combined trust loans, entrusted loans and undiscounted bankers’ acceptances, which are common forms of shadow banking finance, fell by a net 12 billion yuan in April, according to Reuters calculations.