New bank loans in China rebounded more than expected in March, recovering from a sharp drop the previous month, as policymakers pledge to ramp up stimulus to buttress the world’s second-largest economy against an escalating trade war with the United States.
Chinese banks extended 3.64 trillion yuan ($500 billion) in new yuan loans in March, according to Reuters calculations based on data released by the People’s Bank of China (PBOC) yesterday.
Analysts polled by Reuters had predicted new yuan loans would rise to 3trn yuan last month, compared with a lower-than-expected 1.01trn yuan in February and 3.09trn yuan in the same month last year.
For the first quarter, total new loans rose to 9.78trn yuan from 9.46trn yuan in the same period last year.
“The financial data of March and the first quarter are both significantly better than expected,” said Dong Ximiao, chief researcher at Merchants Union Consumer Finance.
Zhou Hao, chief economist at Guotai Junan International, said the stronger than expected lending data could boost confidence in the economy and delay an expected cut in banks’ reserve requirement ratio (RRR).
Fiscal policy stimulus aimed at boosting domestic demand could still be the key to counter the impact from the escalating trade war, Zhou said.
Household loans, including mortgages, rose 985.3bn yuan in March, compared with a contraction of 389.1bn yuan in February, according to Reuters calculations based on central bank data. Corporate loans jumped to 2.84trn yuan from 1.04trn yuan. China is contending with deepening trade frictions sparked by US President Donald Trump’s sweeping tariffs on trading partners.
Beijing has showed no sign of backing down, complicating any prospects of a near-term resolution and raising the stakes for a prolonged standoff that could further weigh on exports – one of the few bright spots in China’s uneven economy.
The tariffs will put immense pressure on China’s exporters and its broader manufacturing sector, particularly when domestic demand remains sluggish and deflationary pressures persist. Consumer and business confidence were already shaky before Trump’s re-election in November.
Some analysts, including Zhou Shilei, director of the global financial market department at UOB (China), expect an imminent cut to the RRR.
But Zhou Shilei said the urgency of a rate cut in open market operations is, meanwhile, diminishing after the US excluded from steep tariffs some electronics imported largely from China.
Financial News, a PBOC publication, wrote in a commentary on Sunday that room and strength remain for China’s macro policies, and the country would step up countercyclical adjustments according to situational needs and external influences.
In a recent commentary, the state-run People’s Daily flagged the potential for further expansion of fiscal deficits, special bonds and special treasury bonds.
The publications were echoing similar language from Premier Li Qiang earlier in the week who was quoted as saying that China had “sufficient reserve of policy tools to hedge against adverse external impacts”.
China’s outstanding yuan loans rose 7.4 per cent in March from a year earlier, up from a 7.3pc pace in February. Analysts had expected growth to remain steady.
Broad M2 money supply grew 7.0pc in March on-year, Sunday’s central bank data showed, below the 7.1pc forecast of analysts polled by Reuters. In February, M2 expanded 7.0pc.
The narrower M1 money supply rose 1.6pc year-on-year, compared with 0.1pc growth in February.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, rose to 8.4pc from 8.2pc in February. Acceleration in government bond issuance to boost the economy helped boost growth in TSF, analysts said.
TSF includes off-balance-sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.
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