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China's new credit rises to record as bank loans surge

New credit hits record $425b in Jan as bank loans surge; worries ‘exaggerated’

The people’s Bank of China says the weighted average lending rate was up at 7.2 per cent. — AFP

China’s broadest measure of new credit rose to a record last month as lending surged, indicating the central bank will allow enough funding to sustain economic growth amid a crackdown on shadow financing.

Aggregate financing was 2.58 trillion yuan ($425 billion) in January, the People’s Bank of China said on Saturday, exceeding the 1.9 trillion yuan median estimate in a Bloomberg News survey and the previous high of 2.54 trillion yuan a year ago. New local-currency loans were 1.32 trillion yuan, 23 per cent more than a year earlier and the highest monthly figure in four years, while trust loans halved amid default concerns.

Saturday’s data add to signs that the world’s second-biggest economy can maintain expansion of above seven per cent this year even as the government tries to contain risks from shadow banking. Reports this week showed an unexpected acceleration in trade growth in January while subdued inflation gives China’s leaders more room to support growth.

“Markets should react positively,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group in Hong Kong. “Banks are still extending a lot of credit and this will somewhat cool down fears that China is slowing dramatically. Liquidity is plentiful and able to support growth.”

Premier Li Keqiang said last year that annual economic growth of 7.2 per cent is needed to keep unemployment stable and indicated that seven per cent is his “bottom line.”

Subdued inflation

China’s export and import growth rose more than analysts estimated in January, customs data showed on February 12. Inflation was 2.5 per cent last month, the same pace as in December, the statistics bureau said on Friday.

Economists’ estimates for aggregate financing, which includes bank lending, corporate bond issuance and shadow-banking products like entrusted loans, ranged from 1.5 trillion yuan to 2.39 trillion yuan. Saturday’s figure compared with a previously reported 1.23 trillion yuan in December.

New local-currency loans compared with the median economist estimate for 1.1 trillion yuan and 1.07 trillion yuan a year earlier. New loans were 482.5 billion yuan in December.

Bank lending usually surges in January as financial institutions receive new quotas and offer credit at the start of the year to earn more interest, according to economists at ANZ, Citigroup and Mizuho Securities Asia. Last month’s figure may also have been boosted as loans postponed from December were handed out.

“The government has allowed credit conditions to ease,” said Wang Tao, chief China economist at UBS in Hong Kong. “Worries about policy being too tight or that rate increases are hurting credit and economic growth are exaggerated.”

The weighted average lending rate in China was 7.2 per cent in December, up from 6.22 per cent a year earlier, PBOC data released earlier this month show. In December, 63.4 per cent of loans had interest rates above benchmarks, up from 59.7 per cent a year earlier, according to the central bank.

Money-market rates have also increased. The benchmark seven-day repurchase rate, a gauge of interbank funding availability, averaged 4.7 per cent in January, up from 3.08 per cent a year earlier.

M2, China’s broadest measure of money supply, rose 13.2 perent from a year earlier in January, the Beijing-based central bank said in Saturdays’ statement. That matched the median economist estimate and compared with 13.6 per cent in December. The growth in outstanding local-currency loans slowed to 14.3 per cent in January from 15.4 per cent a year earlier.