China March new bank loans jump, broad credit growth accelerates

© Reuters. FILE PHOTO: Chinese 100 yuan banknotes are seen in a counting machine while a clerk counts them at a branch of a commercial bank in Beijing, China, March 30, 2016. REUTERS/Kim Kyung-Hoon

By Judy Hua and Kevin Yao

BEIJING (Reuters) -New bank lending in China rose more than expected in March, while broad credit growth accelerated from the previous month as the central bank kept policy accommodative to support the slowing economy.

Chinese banks extended 3.13 trillion yuan ($492 billion) in new yuan loans in March, up sharply from February and exceeding analyst expectations, data released by the People's Bank of China on Monday showed.

Analysts polled by Reuters had predicted new yuan loans would rise to 2.68 trillion yuan in March. The new loans were higher than 2.73 trillion yuan a year earlier.

That pushed bank lending in the first quarter to a record 8.34 trillion yuan, up 8.7% from 7.67 trillion yuan in the first quarter of 2021 - the previous record.

"Bank loans and total social financing rose more than expected in March. This confirms that the government did loosen monetary policy," said Zhiwei Zhang, chief economist at Pinpoint Asset Management.

"Strong credit supply is helpful, but the economy will likely stay weak with many cities under lockdown. The outlook of the COVID outbreaks and the zero (COVID) tolerance policy are the most important uncertainty the economy faces."

Household loans, mostly mortgages, rose to 753.9 billion yuan in March, after contracting by 336.9 billion yuan in February, while corporate loans jumped to 2.48 trillion yuan last month from 1.24 trillion yuan in February.

China's cabinet last week held out the prospect of more measures to support the economy under pressure from renewed COVID-19 outbreaks and a slowing global recovery.

MODEST EASING EXPECTED

To spur growth, the central bank has cut interest rates and banks' reserve requirement ratio (RRR), with more easing steps expected.

"Credit growth will probably continue to accelerate in the coming months amid declines in borrowing costs and support to the housing market," Sheana Yue at Capital Economics said in a note.

"We think policy easing will continue in the near term," Yue said, expecting the central bank to cut the rate on its medium-term lending facility (MLF) by 10 basis points as early as on Friday.

Broad M2 money supply grew 9.7% in March from a year earlier, central bank data showed, above estimates of 9.2% forecast in the Reuters poll. M2 grew 9.2% in February from a year ago.

Outstanding yuan loans grew by 11.4% in March from a year earlier, compared with 11.4% growth in February. Analysts had expected 11.4% growth.

Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 10.6% in March from a year earlier and from 10.2% in February.

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.

In March, TSF rose sharply to 4.65 trillion yuan from 1.19 trillion yuan in February. Analysts polled by Reuters had expected March TSF of 3.7 trillion yuan.