- May new loans 1.36 trillion yuan versus forecast 1.6 trillion yuan
- May M2 money supply +11.6% y/y, versus forecast of +12.1%
- May TSF 1.56 trillion yuan, against forecast 2 trillion yuan
- C.bank promises to strengthen “counter-cyclical” policy adjustments
BEIJING, Jun 13 (Reuters) – China’s new bank lending picked up in May from the previous month as the central bank continued its accommodative policy to support the economy, but signs of slowing momentum have raised expectations that more stimulus measures may be needed to support the economy. recovery.
The weaker-than-expected credit data could bolster policymakers’ case for more support measures, including a benchmark interest rate cut this month, analysts said amid deflationary risks and rising local government debt.
New bank loans rose to 1.36 trillion yuan ($190.18 billion) in May, data from the People’s Bank of China (PBOC) showed on Tuesday, up from April but missing analysts’ estimates.
Economists polled by Reuters had expected new loans in yuan to rise to 1.6 trillion yuan last month, up from 718.8 billion yuan in April and 1.89 trillion yuan a year earlier.
“Credit growth is weak, which is not surprising given that other economic indicators such as PMI and exports also provide consistent signals,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, said in a note.
“This explains why the PBOC cut the reverse repo rate this morning. It’s a small step in the right direction. I expect more policy action to follow in the coming weeks.”
China’s central bank cut short-term borrowing costs on Tuesday to help restore confidence, signaling possible longer-term easing of interest rates.
Capital Economics analysts said a sharp slowdown in credit growth is of particular concern. Loans outstanding in yuan rose 11.4% year-on-year in May, compared to growth of 11.8% in the previous month. Analysts had forecast growth of 11.6%.
“This is concerning given that credit growth is one of the most reliable leading indicators of China’s economic cycle. Unless the credit slowdown is stopped soon, the reopened recovery risks being derailed,” they said in a note.
The world’s second-largest economy grew faster than expected in the first quarter, recovering from three years of pandemic restrictions, but the recovery has been patchy as the services sector outperformed manufacturing and exports.
Household loans including mortgages increased by 367.2 billion yuan in May, compared to a contraction of 241.1 billion yuan in April. Corporate loans rose from 683.9 billion yuan in April to 855.8 billion yuan in May, central bank data showed.
Recent data has shown that China’s recovery is stalling as global demand falters, raising expectations that authorities will need to boost growth and contain unemployment.
PROTECTIVE LIGHTING STEPS SEEN IN PIPELINE
The PBOC will strengthen “countercyclical” policy adjustments to fully support the real economy and policy tools will be used to reduce borrowing costs, central bank governor Yi Gang said at a meeting in Shanghai last week, according to a statement.
“We believe these comments suggest that Beijing is now seriously concerned about the possibility of a double dip, and that the PBOC may respond in the near term by ramping up stimulus,” Nomura analysts said in a note.
Some analysts expect the PBOC to cut the benchmark lending rate, or loan prime rate (LPR), this month, citing recent deposit rate cuts by Chinese banks and an expected pause in rate hikes from the US Federal Reserve.
The central bank, which cut banks’ reserve requirement ratios – the amount of cash banks are required to hold as reserves – in March, has left the LPR unchanged since September.
China’s chief economic planner on Tuesday released a series of measures to cut business costs, including exempting and reducing value-added tax for small businesses and lowering borrowing rates.
Broad M2 money grew by 11.6% year on year in May, less than 12.1% predicted in a Reuters poll. M2 grew by 12.4% in April.
Growth in outstanding total social finance (TSF), a broad measure of credit and liquidity in the economy, slowed to 9.5% in May from 10% in April.
TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as IPOs, loans from trust companies and bond sales.
In May, TSF rose from 1.22 trillion yuan in April to 1.56 trillion yuan. Analysts had predicted a TSF of 2 trillion yuan.
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