China February new bank loans fall more than expected, mounting pressure on c.bank

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  • Credit growth is below expectations
  • February new loans 1.23 trln yuan against f’cast 1.49 trln yuan
  • Money supply in February M2 +9.2% year on year, against an f’cast forecast of +9.5%
  • February TSF 1.19 trln yuan, against f’cast 2.22 trln yuan
  • C.bank maintains an accommodative policy to support growth

BEIJING, March 11 (Reuters) – New bank lending in China fell more than expected in February as general credit growth slowed, increasing pressure on the central bank to ease policy further. to support the slowing economy.

Chinese banks extended 1.23 trillion yuan ($195 billion) in new yuan loans in February, down sharply from a record 3.98 trillion yuan in January and below analysts’ expectations, the data showed. released Friday by the People’s Bank of China (PBOC). .

A pullback in loans in February was widely expected, as Chinese banks tend to preload loans at the start of the year to get better quality customers and gain market share.

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Analysts polled by Reuters had predicted new yuan lending would fall to 1.49 trillion yuan in February. But the final tally was also lower at 1.36 trillion yuan in February 2021, when the economy rebounded from a pandemic-induced crisis.

“General credit growth was much weaker than expected last month, reversing much of the acceleration of recent months,” Julian Evans-Pritchard of Capital Economics said in a note.

“This suggests that more easing measures will be needed to achieve the policy goals that were recently set out in the National People’s Congress.”

Household loans, mostly mortgages, suffered a rare contraction of 336.9 billion yuan in February from 843 billion yuan in January, indicating continued weakness in China’s property market, a major driver of economic growth.

Ting Lu, chief China economist at Nomura, said a contraction in medium- and long-term household lending was the first since the data was released in 2007, and matched a 40% drop in home sales. nine of the top 100 developers in January-February.

Corporate loans fell to 1.24 trillion yuan from 3.36 trillion yuan.

Ming Ming, chief economist at CITIC Securities, said February lending may reflect weakness in the housing sector and household demand, but could accelerate as earlier easing measures begin to wear off. to be smelled.

“With the implementation of a series of policies such as the promotion of favorable monetary and investment policies to stabilize the economy, March data would be better than February data,” he said.

FURTHER RELAXATION STEPS EXPECTED

To spur growth, the central bank cut interest rates and the reserve requirement ratio (RRR) for banks, with further easing measures expected. Read more

The PBOC could give markets more clues about its liquidity and rate plans as early as next Tuesday, when its medium-term lending facility (MLF) matures.

“We continue to expect a 50 basis point cut in the RRR and a 10 basis point cut in the policy rate by the end of the second quarter of this year, as the PBOC may need to do more to echo the State Council’s call for lower effective lending rates,” Goldman Sachs analysts said in a note. .

Chinese Premier Li Keqiang said on Friday he was confident of achieving the economic growth target of around 5.5 percent for this year despite headwinds, pledging to provide more political support over the course of the year. a politically sensitive year. Read more

But many economists say that target is ambitious given the challenges, including the housing downturn, growing outbreaks of COVID-19 and an uncertain global recovery.

China said it would keep money supply and total social finance growth essentially in line with nominal economic growth this year.

M2 broad money supply rose 9.2% from a year earlier, central bank data showed, below Reuters poll estimates of 9.5%. It increased by 9.8% in January.

Outstanding yuan loans rose 11.4 percent year-on-year, compared with 11.5 percent growth in January. Analysts were expecting growth of 11.5%.

Growth in the total stock of social finance (TSF), a broad measure of credit and liquidity in the economy, slowed to 10.2% in February from a year earlier and 10.5% in January.

The TSF includes forms of off-balance sheet financing that exist outside of the conventional bank lending system, such as initial public offerings, trust company loans, and bond sales.

In February, TSF fell to 1.19 trillion yuan from 6.17 trillion yuan in January. Analysts polled by Reuters had expected a February TSF of 2.22 trillion yuan.

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Editing by Raju Gopalakrishnan and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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