Bank loans from Japan and China reached record 4.9 trillion yuan
2023.02.13 03:26
Bank loans from Japan and China reached record 4.9 trillion yuan
By Kristina Sobol
Budrigannews.com – In January, China’s new bank loans increased more than anticipated to a record 4.9 trillion yuan ($720.21 billion), as the central bank attempts to kickstart a recovery in the world’s second-largest economy following the removal of strict pandemic controls.
After severe COVID measures and a property market crisis reduced China’s growth to 3% in 2022, one of its lowest rates in nearly 50 years, a strong rebound in credit demand will be necessary for this year’s economic revival.
The People’s Bank of China (PBOC) released data on Friday showing that January’s new loans exceeded analysts’ expectations and more than tripled December’s total.
Reuters polled analysts and found that new loans in yuan would rise to 4 trillion yuan in January, surpassing the previous monthly record of 3.98 trillion yuan set in January 2022.
The size of the increase has fueled hopes that business and consumer confidence is rapidly improving since the anti-COVID restrictions were abruptly lifted in December. Chinese banks typically issue more loans at the beginning of the year in an effort to gain higher-quality customers and increase their market share.
In a note, Guotai Junan International chief economist Zhou Hao stated, “China’s credit data came in stronger than expected, suggesting that the credit support remains strong at the beginning of the year.”
“In general, this is a favorable credit report that is likely to contribute significantly to the economy’s recovery in the first quarter of 2023. Property sales, which are highly correlated with bank credit, will be the next market focus.
Even with a weaker global backdrop, analysts believe improved credit conditions, robust infrastructure spending, and supportive policy measures could boost economic growth to about 5% this year.
However, they warn that the recovery’s momentum may be uneven, necessitating policy support for some time.
Other data released on Friday showed that China’s factory gate prices fell more than expected in January, indicating that manufacturers are not yet operating at full capacity despite the end of the zero-COVID policy. Additionally, a car industry association reported that vehicle sales fell 35% from a year earlier.
“In response to policy guidance to increase credit supply, banks were compelled to accelerate loan issuance beginning in the fourth quarter of the previous year.” However, actual demand is weak,” stated an anonymous employee of a state-owned bank.
Since manufacturing companies took out so many loans last year, he added, their appetite for additional credit remained low.
From 175.3 billion yuan in December, household loans, primarily mortgages, increased to 257.2 billion yuan in January, while corporate loans increased to 4.68 trillion yuan from 1.26 trillion yuan.
According to Zhiwei Zhang, chief economist at Pinpoint Asset Management, the divergence between corporate and household loans indicated a faster recovery in corporate credit while the high unemployment rate weighed on household confidence.
From 2.88 trillion yuan in December, China’s new household deposits increased to 6.2 trillion yuan in January. Analysts are keeping a close eye on that number to see if it indicates that shell-shocked consumers are spending again after a year of lockdowns and job losses.
The gains on other important credit gauges were also encouraging.
The broad M2 money supply increased by 12.6% in January, which was higher than the 11.6% forecast in the Reuters poll and the fastest rate since April 2016. In December, it increased 11.8%.
The number of outstanding yuan loans increased by 11.3% over the previous year, as opposed to 11.1% in December. 11.0% growth was predicted by analysts.
This year, the central bank has pledged to make its policy “precise and forceful” to support the economy, maintain reasonable liquidity levels, and reduce business funding costs.
According to Reuters polls of analysts, the central bank is expected to cut the benchmark lending rate, also known as the one-year loan prime rate (LPR), by 5 basis points (bps) in the first quarter. Additionally, it is anticipated that it will provide more specific support measures for industries that are experiencing the most difficulty.
After two reductions last year, the most recent occurring in December, some analysts are also anticipating additional reductions in banks’ reserve ratios (RRR) this year.
Outstanding total social financing (TSF), a broad measure of the economy’s credit and liquidity, decreased from 9.6% in December to 9.4% in January, the slowest rate since January 2017.
Initial public offerings, loans from trust companies, and bond sales are examples of off-balance sheet forms of financing that exist outside of the conventional banking system and are included in TSF.
TSF increased from 1.31 trillion yuan in December to 5.98 trillion yuan in January. Reuters polled analysts who anticipated 5.40 trillion yuan.
