China’s credit expanded faster than expected in March as the central bank unleashed long-term liquidity for banks and economic activities continued to recover.
(Bloomberg) — China’s credit expanded faster than expected in March as the central bank unleashed long-term liquidity for banks and economic activities continued to recover.
- Aggregate financing, a broad measure of credit, reached 5.4 trillion yuan ($784 billion) last month, the People’s Bank of China said Tuesday. That was above the median estimate of 4.5 trillion yuan in a Bloomberg survey of economists, and compares with 4.7 trillion yuan in the same month a year ago
- Financial institutions offered 3.9 trillion yuan worth of new loans. Economists had projected 3.3 trillion yuan
Credit growth usually picks up at the end of each quarter as banks rush to meet lending targets. But lending and financing activities were also stronger than expected in the first two months of this year, as government bond issuance surged and corporate credit demand began to recover following the abandonment of Covid restrictions.
The PBOC has stepped up cash injections to help banks cope with tighter liquidity. It unleashed 500 billion yuan of long-term cash into the banking system by cutting the reserve requirement ratio last month, according to estimates by Bloomberg Economics. The central bank also added the most cash in over two years through its monthly medium-term loans operation in March.
Corporate loans continued to grow fast in March, with new mid and long-term loans almost doubling from February to 2 trillion yuan last month. New household mid- and long-term loans, a proxy for mortgages, also picked up strongly to the highest level since January 2022 as home sales recovered.
The fast credit expansion in the first quarter “indicates that growth will likely rebound strongly in coming quarters,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management Ltd. The central bank may not be in a hurry to contain the strong credit growth anytime soon given the weak inflation, he said.
The PBOC vowed to keep “the overall quantity of money and credit appropriate with a stable growth pace” in its statement announcing the RRR cut last month. Governor Yi Gang, who was reappointed to his post in March, has signaled monetary policy will largely be stable this year, with current interest rates in the economy being “appropriate.”
(Updates with additional details from fifth paragraph)
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