China’s new local-currency loans exceeded estimates last month, while money supply expanded at a faster pace, a sign policy makers are maintaining credit support for the economy after first-quarter growth unexpectedly slowed.
Lending was 792.9 billion yuan (US$129 billion) last month, the People’s Bank of China (PBOC) said on Friday in Beijing, compared with the median estimate of 755 billion yuan in a Bloomberg News survey. M2 money supply rose 16.1 percent from a year earlier, following March’s 15.7 percent advance.
Inflation that’s run below the government’s annual goal every month this year has allowed the central bank to keep credit flowing as a recovery in the world’s second-biggest economy threatens to falter. At the same time, the lending growth and expansion of so-called shadow banking may increase risks in the financial system that new leaders including Chinese President Xi Jinping (習近平) are trying to control.
“The strong credit supply and bank loans in the first four months of this year will be sufficient to support an economic recovery through the third quarter,” said Ding Shuang (丁爽), senior China economist at Citigroup Inc in Hong Kong. “Financial risks may also rise.”
Aggregate financing, a broader measure of credit that includes trust loans, stock and bond sales, was 1.75 trillion yuan last month, compared with a record 2.54 trillion yuan the previous month.
The median economist forecast was for a 15.5 percent increase in money supply while the 10 forecasts for aggregate financing ranged from 1 trillion yuan to 1.8 trillion yuan, with a median of 1.5 trillion yuan.
Aggregate financing was a record in the first three months and new yuan loans were the most for a quarter in almost four years, spurring concerns that faster credit is not translating into economic growth.
The PBOC said this week that it will use various tools to guide “stable and reasonable” growth in money supply and credit.
“The negative spillover effects from loose monetary policy in major economies are growing, which has helped pro- cyclical credit expansion at home,” the PBOC said.
“New leaders are keen to put their house in order by preventing any small financial and debt incidents,” Bank of America Corp economists led by Hong Kong-based Lu Ting (陸挺) said in a note on Friday.
The banking regulator in March tightened rules on wealth-management products.
The Chinese government set a target for a 7.5 percent increase in GDP this year and Chinese Premier Li Keqiang (李克強) last month urged more efforts to improve the quality and benefits of economic growth, indicating the government is prepared to tolerate slower expansion.
Gauges of manufacturing and service industries released this month declined and a drop in producer prices deepened last month, indicating demand is softening.
“Monetary conditions are still loose,” said Wang Qinwei (王秦偉), China economist at Capital Economics Ltd in London, who previously worked at the PBOC.
More broadly, policy makers have moved toward “tightening oversight of lending through other non-traditional channels since late March, which should start to have an effect on the pace of overall credit expansion,” Wang said.