China Bank Lending Jumps Faster Than Expected in May

 

Chinese banks sharply expanded their loans during May, in a signal that Beijing is taking action to reverse the country’s slowing economy amid continuing coronavirus pandemic lockdowns.

Financial institutions extended 1.89 trillion yuan ($282.62 billion) in new yuan loans in May, nearly tripling April’s tally, according to data released by the People’s Bank of China on Friday.

The new bank lending was far more than expected as broader credit growth also quickened.

Analysts polled by Reuters had predicted new yuan loans would surge to 1.3 trillion yuan in May from 645.4 billion yuan in April and against 1.5 trillion yuan a year earlier.

“Credit growth was stronger than expected last month and is likely to accelerate further following the clear signal in late May that policymakers want banks to step up lending,” Julian Evans-Pritchard of Capital Economics said in a note.

“More policy easing is likely. But private sector credit demand is likely to remain subdued while, on current budgetary plans, local government borrowing is about to slow. A dramatic increase in credit growth still seems unlikely.”

New household loans, including mortgages, rose to 288.8 billion yuan in May, after contracting 217 billion yuan in April, while new corporate loans soared to 1.53 trillion yuan in May from 578.4 billion yuan in April.

However, 38% of the new monthly loans were in the form of short-term bill financing, which was down from 80% in April but still higher than 10% in the first quarter, suggesting real credit demand remains weak.

The cabinet announced a package of policy steps last month, including broader tax credit rebates and postponing social security payments and loan repayments to support businesses.

Local media also reported last month that financial authorities had told commercial banks to speed up lending.

 

  • Reuters, with additional editing by George Russell

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.