China Credit Data Show Continued Recovery in First Two Months

(Bloomberg) -- China’s credit growth slowed in February after a seasonal surge the previous month, with the net development in the first two months of the year signaling continued recovery in credit supply.

• Aggregate financing was 703 billion yuan ($105 billion) in February, the People’s Bank of China said Sunday, compared with an estimated 1.3 trillion yuan in a Bloomberg survey. Broad M2 money supply gained 8.0 percent, matching its slowest-ever expansion

Key Insights

• Aggregate financing in the first two months was 5.31 trillion yuan, 1.05 trillion yuan higher than in the same period last year, according to the central bank.
• For the same period, the shadow banking sector shrank 21.7 billion yuan:
  • Entrusted loans (organized by a bank between borrowers and lenders) were down 120.8 billion yuan
  • Trust loans (made by trust companies to finance infrastructure and real estate) rose 30.8 billion yuan
  • Bankers’ acceptance (short-term credit issued by a company with a bank’s guarantee) up 68.3 billion yuan
• Financial institutions offered 885.8 billion yuan of new loans in February, versus a projected 950 billion yuan
• “China’s credit data are important to help determine whether the economy is stabilizing,” and authorities’ efforts to get credit flowing are gaining traction, according to economists at Bloomberg Economics including Chang Shu, speaking before the release
• The central bank may target aggregate financing growth at around 10 percent this year to keep the total debt ratio broadly stable, Ding Shuang, chief economist at Standard Chartered Ltd. for Greater China & North Asia, wrote in a note before the data was announced

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• M1 growth accelerated for the first time since September, indicating recovering sentiments in corporate investment
• Authorities have put fiscal policy in the driving seat this year to boost the economy, easing the pressure on policy
• Premier Li Keqiang said banks should supply more longer-term loans to the real economy after a surge in short-term bill financing in January

To contact Bloomberg News staff for this story: Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Jeffrey Black at jblack25@bloomberg.net, James Mayger

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With assistance from Bloomberg