UPDATE 3 – China Lending Falls More Than Expected In April As c.bank Starts To Cut Stimulus

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* April new loans 1.47 trillion yuan vs. 1.6 trillion yuan forecast

* April money supply M2 + 8.1% y / y against the forecast of + 9.3%

* Outstanding TSF + 11.7% YoY vs. 12.3% in March

* TSF 1.85 trillion yuan, up from 2.25 trillion yuan forecast (adds details on slowest credit growth in nearly two decades)

BEIJING, May 12 (Reuters) – China’s new bank lending fell more-than-expected in April, while money supply growth slowed to a 21-month low as the central bank gradually reduces pandemic-triggered stimulus for debt and financial risks in hot regions. economy.

The world’s second largest economy grew at a record 18.3% in the first quarter, recovering from last year’s coronavirus shock caused by strong domestic consumption, export growth and continued government support for businesses, especially small firms.

But a spike in lending earlier this year after record lending in 2020 prompted regulators to advise banks to cut their ledgers to hedge against the risks of speculative bubbles in the country’s financial and property markets, Reuters reported.

“The April drop in overall social finance growth was much larger, and bank loans, corporate debt finance and non-standard finance showed a relatively large decline,” said Luo Yunong, a fixed income analyst at Industrial Securities.

“The main reason is weak demand for financing, not a reduction in the supply of liquidity.”

Chinese banks pledged 1.47 trillion yuan ($ 228.21 billion) in new loans in April, up from 2.73 trillion yuan in March and lagging behind analysts’ expectations in March, according to data released by the People’s Bank of China (PBOC) on Wednesday. 1.6 trillion yuan.

The amount was also below the 1.7 trillion yuan published in the same month a year earlier, when politicians took unprecedented measures to cope with the shock caused by the coronavirus crisis.

The growth in outstanding RMB loans fell to 12.3% from a year earlier, the slowest pace since February 2020, up from 12.6% in March. Analysts had expected growth of 12.5%.

Except for the sharp drop seen during the COVID-19 quarantine early last year, credit growth in April was the slowest since 2002.

Broad money M2 grew 8.1% year-over-year, falling to its lowest level since July 2019, well below Reuters’ forecasts of 9.3%. In March, it grew by 9.4%.

Investors are increasingly worried about tightening policies as Beijing seeks to pull out of emergency measures now as the economy recovers from the depths of the pandemic and policymakers focus on containing debt risks.

Top leaders reiterated their pledge last week that they would not make a sharp turn in macro policy and make the economic recovery more balanced.

The government has extended the preferential loan repayment scheme for small businesses until the end of this year.

While no interest rate hike in China is foreseen this year due to persisting global uncertainty, most analysts expect policy normalization to continue and previous stimulus policies to be phased out, with credit conditions likely to remain relatively tight throughout the year.

Growth in outstanding general social finance (TPF), a broad measure of credit and liquidity in the economy, slowed to 11.7% in April from a year earlier and from 12.3% in March.

“We predicted a slowdown in lending growth to 11.5% around the middle of this year. In any case, the latest data suggests that the slowdown in growth is happening even faster, ”says Capital Economics.

“And we expect that in the second half of the year it will remain up to 10.5% in December. If that happens, it will be a permanent setback for the economy in the next few quarters. ”

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

TSF fell short of expectations in April when it fell to 1.85 trillion yuan from 3.34 trillion yuan in March. Analysts polled by Reuters had expected the April TSF to be 2.25 trillion yuan.

Reporting by Lusha Zhang and Kevin Yao; Edited by Kim Coghill

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