China’s credit growth stronger than expected, money supply grew fasters in nearly seven years

 

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China reported unexpectedly strong credit growth for February, with money supply growing at the fastest pace in nearly 7 years, as the authority looks to support the economic recovery.

Banks extended 1.81 trillion yuan ($260 billion) in new loans in February, according to data released by the People’s Bank of China, down from the record high of 4.9 trillion yuan in January, beating market expected 1.50 trillion yuan and higher than 1.23 trillion yuan a year earlier.

In breakdown, household loans, mostly mortgages, fell to 208.1 billion yuan in February from 257.2 billion yuan in January, while corporate loans fell to 1.61 trillion yuan from 4.68 trillion yuan, showed the data.

Broad M2 money supply grew 12.9% in February from a year earlier, the data showed, the fastest pace since March 2016, well above estimates of 12.5% in the Reuters poll and a 12.6% pace in January.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 9.9% in February from a year earlier, the highest since November 2022, and rising from 9.4% in January.

TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales.

TSF for the month of February fell to 3.16 trillion yuan from 5.98 trillion yuan in January, but was still well ahead of expectations for 2.20 trillion yuan.

Among other closely watched credit measures, outstanding yuan loans grew 11.6% in February from a year earlier, the highest since December 2021, compared with 11.3% growth in January and expected 11.4% growth.

The PBOC data also showed that new household deposits declined sharply to 792.6 billion yuan in February from 6.2 trillion yuan in January.