China: Credit growth slows in March
In March, Chinese banks distributed CNY 2.7 trillion (roughly USD 410 billion) in new yuan loans, beating market expectations and up from February’s CNY 1.4 trillion figure.
However, annual growth in the stock of total social financing (TSF)—a broader measure of credit and liquidity in the economy that includes loans, bonds and other non-traditional instruments—fell from 13.3% in February to 12.3% in March amid soft corporate bond financing. Moreover, annual growth in M2 money supply fell from 10.1% in February to 9.4% in March. The figures show that credit growth resumed its downward trend following a brief uptick in February amid the Lunar New Year.
Looking ahead, credit growth is likely to ease slightly further by year-end, as the Bank looks to strike a balance between reining in financial risks—particularly in the property sector—without withdrawing support for the economy prematurely. Most panelists see key interest rates staying unchanged this year.
According to David Wang, head of China Economics at Credit Suisse:
“March credit and money supply data do not suggest that Chinese authorities are adopting a drastically tighter monetary stance than we have been anticipating. Instead, developments have been consistent with a monetary policy stance between those of 2019 and 2020, i.e., tighter than that of 2020 but still more accommodative than that of 2019.”
Economists at Nomura concur:
“We believe today’s credit data are still consistent with Beijing’s ‘no sharp turn’ policy stance. The PBoC may closely monitor the situation in corporate bond markets in coming months. In our view, net financing in the corporate bond market that is too weak could be offset by the PBoC’s adjustment in bank loan quotas, so AF growth will likely not drop too much.”