China’s bank lending and credit provision last month hit record highs, indicating that government and central bank efforts to boost support for the economy are having an effect.
Aggregate financing last month increased by 5.15 trillion yuan (US$732.83 billion), compared with a median estimate of 3.14 trillion yuan. That was a record for any month in comparable data back to 2017.
Financial institutions last month offered 2.85 trillion yuan of loans, versus a projected 1.8 trillion yuan — the highest figure for the month since data began being compiled in 1992.
The gradual recovery in the economy, combined with additional cheap funding and interest rate cuts by the People’s Bank of China (PBOC), likely contributed to the expansion.
New loans from banks were the biggest driver of the expansion, jumping to about 3 trillion yuan last month from 720 billion yuan in February.
Almost 1 trillion yuan of corporate bonds and 636 billion of government bonds were issued last month.
“The 5 trillion yuan rise in total social financing was a real surprise, supported by the bullish credit bond issuance,” Australia and New Zealand Banking Group economist Xing Zhaopeng (邢兆鵬) said. “Looking forward, the PBOC will continue to stay in an easing mode at the cost of [a] higher debt-to-GDP ratio.”
The strong credit expansion shows the effects of forceful policy support as the economy begins its recovery from the COVID-19 pandemic, Bloomberg economists said.
“Still, the V-shaped recovery in the credit path does not mean that the economy will immediately recoup what’s likely to be an unprecedented contraction in Q1 as it rebounds,” the economists said.
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