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China’s new bank loans surged by more than expected to hit an all-time high in January, as the authorities moved to shore up the slowing economy, reinforcing expectations for more policy stimulus in the coming months.
Banks extended 4.92 trillion yuan ($683.7 billion) in new yuan loans in January, marking a new record high, increasing sharply from the previous month and beating analysts’ expectations, according to data released by the People’s Bank of China (PBOC).
The new loans in January more than quadrupled from the 1.17 trillion in January and exceeded the previous record of 4.9 trillion yuan in the same month a year earlier. Chinese banks tend to front-load loans at the beginning of the year to get higher-quality customers and win market share.
Chinese banks extended a record 22.75 trillion yuan in new loans in 2023, an increase of 6.8% from the year before, but loan growth fell to its lowest in more than 20 years in December as consumers and companies were reluctant to take on more debt amid weak economic recovery.
The central bank said on Thursday it would keep policy flexible and precise to spur domestic demand, while maintaining price stability, amid signs of a patchy economic recovery and persistent deflationary risks.
“In light of deepened deflation and downbeat sentiment, we continue to expect two more policy rate cuts and two more RRR cuts through the remainder of this year,” analysts at Goldman Sachs said in a note.
To prop up faltering growth, the PBOC cut the reserve requirement ratio (RRR) for banks by 50-basis points on Feb. 5, the biggest in two years, releasing 1 trillion yuan in long-term liquidity.
Household loans, mostly mortgages, climbed to 980.1 billion yuan in January from 222.1 billion yuan in December, while corporate loans jumped to 3.86 trillion yuan from 891.6 billion yuan.
Broad M2 money supply grew at a slower pace of 8.7% in January from a year earlier, the data showed, the lowest since November 2021, below a forecast 9.3% by analysts in the Reuters poll, compared to the 9.7% growth in December.
Outstanding yuan loan grew by 10.4% in January from a year earlier, slowing from the 10.6% growth in December and in line with analysts’ expectation of 10.4% growth.
Outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, stood at 9.5% in January, in line with that in December.
The PBOC has said this year’s growth of TSF and money supply would match expected goals on economic growth and inflation.
Any acceleration in government bond issuance could help boost TSF, which includes off-balance sheet forms of financing that exist outside the conventional bank lending system.
China has issued 2.62 trillion yuan in 2024 advance quotas for local government special bonds to fund key investment projects, a finance ministry official said earlier this month. Local governments issued a net 3.96 trillion yuan in special bonds in 2023, exceeding the annual quota, official data showed.
In January, TSF rose to 6.5 trillion yuan from 1.94 trillion yuan in December. Analysts polled by Reuters had expected January TSF of 5.55 trillion yuan.