China’s Credit Growth Surges Back, Signaling Firmer Recovery

(Bloomberg) -- China’s credit growth exceeded all estimates in March after a slowdown during the Lunar New Year, signaling a further firming of the nascent economic recovery ahead.

  • Aggregate financing was 2.86 trillion yuan ($426 billion) last month, compared with about 700 billion yuan in February, the People’s Bank of China said Friday. The median estimate was 1.85 trillion yuan in a Bloomberg survey.

Key Insights

  • Financial institutions offered 1.69 trillion yuan of new loans in the month, versus a projected 1.25 trillion yuan
  • Broad M2 money supply increased 8.6 percent, the fastest pace since February 2018
  • Strong bank loans, robust bond financing and recovering off-book lending helped push up credit growth
    • Entrusted loans (organized by a bank between borrowers and lenders) were down 107 billion yuan
    • Trust loans (made by trust companies to finance infrastructure and real estate) rose 52.8 billion yuan
    • Bankers’ acceptance (short-term credit issued by a company with a bank’s guarantee) up 136.6 billion yuan
    • Total off-book lending sector rose 82.4 billion yuan in March
    • “Economic activities are strengthening” and business confidence has recovered, said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore. "The possibility for more monetary easing in near term is reduced,” with less need for an imminent cut to the reserve-requirement ratio, he said

What Bloomberg’s Economists Say...

“We expect the People’s Bank of China to keep its monetary stance supportive despite the encouraging credit outturn and signs of domestic demand stabilizing. The policy focus may shift more toward measures aimed at getting funding to sectors in need and away from general easing.”
-- Bloomberg economists Chang Shu and David Qu in Hong Kong
-- Click here for the full report

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  • M1 growth, a proxy for corporate investment sentiments, increased 4.6 percent, fastest pace since mid-2018
  • The growth of outstanding aggregate financing stood at 10.7 percent at the end of March, the highest since August 2018. The PBOC had previously said it hopes the growth rate to stay in line with the pace of nominal gross domestic product growth
  • Short-term household debt jumped 429.5 billion yuan in March after a contraction the previous month, the most since early 2007 when the data series started. That indicates consumption growth may see a turn around in the near term, while it also raises the possibility that households are borrowing to boost down payments for homes amid a resurgent property market

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