China new bank loans decline more than expected in April
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
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 frontload 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 Janmarch 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.
China’s economy grew at a faster-thanexpected 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.
Separately, China’s consumer prices rose for a third straight month in April, while producer prices extended declines, signalling an improvement in domestic demand, as Beijing navigates challenges in its bid to shore up a shaky economy.
The closely watched numbers follow better-than-expected imports data for April, suggesting a flurry of policy support measures over the past several months may be helping consumer confidence. Consumer prices edged up 0.3% in April from a year earlier, data from the National Bureau of Statistics showed on Saturday, versus a rise of 0.1% in March and a Reuters poll forecast for an increase of 0.2%.
“Strip out food and energy prices, and the consumer inflation data suggests a comeback in demand, especially in services,” said Xu Tianchen, senior economist at the Economist Intelligence Unit.
Core inflation, excluding volatile food and fuel prices, grew 0.7% in April, up from 0.6% in March.
Overall the consumer price index (CPI) rose 0.1% from the previous month, beating a forecast fall of 0.1% in the poll and reversing a drop of 1% in March.
Most China watchers say Beijing still has its work cut out, though, and the momentum might prove unsustainable, as official surveys show cooling factory and services activity, while a lengthy housing crisis shows no sign of easing, boosting the case for more policy support.
“Price hikes by utility companies is another potential driver,” Xu added.