- Chinese banks went big on lending in January, handing out 4.9 trillion yuan ($721.82 billion) in new loans, a huge leap of 922.7 billion yuan compared to the same month the previous year.
- China’s financial regulators, led by the central bank, have hammered home the importance of keeping the credit spigots open for the real economy in recent months.
- The International Monetary Fund is feeling optimistic about China’s economy. They’ve just bumped up their forecast for the country’s growth in 2022 from 4.4% to a more robust 5.2%.
China saw a record high of new yuan loans in January, with banks handing out over 7.8 trillion yuan ($1.21 trillion) in new loans, according to data from the People’s Bank of China. The figure beat expectations and signaled an improvement in the country’s macro-economy, as well as a faster recovery of business confidence and strengthened financing needs, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company Limited.
The massive loan extension was largely driven by an uptick in corporate borrowing, with businesses taking out 4.68 trillion yuan in new loans. Meanwhile, new medium and long-term lending provided to companies reached 3.5 trillion yuan, the central bank said.
According to analysts, the substantial increase in credit supply was due to continuous policy support for infrastructure and manufacturing investment, as well as the expanding scale of credit from commercial banks to housing enterprises.
For example, China’s Bank of Communications has been ramping up its efforts to serve the real economy, with corporate yuan loans in January rising by more than 230 billion yuan, or 5.5 percent, from the start of the year. This marked both the highest increment and growth rate in three years.
Loans in key areas saw a noticeable acceleration in growth, including medium and long-term manufacturing, green credit industries, and strategic emerging industries. Meanwhile, household loans rose 257.2 billion yuan last month, thanks in part to the diminished impact of COVID-19 on economic activities, strong consumption during the Spring Festival holiday, and the rapid rebound in consumer demand.
Overall, the January figures bode well for China’s economy, as they show a robust start to the year in terms of credit supply, lending, and growth in key industries.
STRONG SUPPORT FOR ECONOMY
The People’s Bank of China (PBOC) and other financial regulators have been making moves to support the real economy. At the end of 2022, the central bank cut the reserve requirement ratio by 0.25 percentage points to boost liquidity and lower financing costs. In the past two months, the PBOC has increased funds in its medium-term lending facility to maintain ample banking system liquidity. The bank injected 997.1 billion yuan into the market in January. The money supply measure M2 rose 12.6% year-over-year to 273.81 trillion yuan, and newly added social financing reached 5.98 trillion yuan.
As growth stabilizes, companies and local governments are expected to ramp up investments and consumer confidence may recover, says China Minsheng Bank’s Chief Economist, Wen Bin. The country will likely maintain its prudent monetary environment to secure a positive trend in the economy. International institutions are also optimistic about China’s growth prospects in 2023. The International Monetary Fund raised its forecast for China’s growth to 5.2%, up from 4.4%, and investment banks including Morgan Stanley and Goldman Sachs have also revised their growth forecasts upward.
China’s central economic work conference noted that the country’s monetary policy should be targeted and effective, and the overall economy is expected to improve in 2023. Moving forward, China’s monetary policy will focus on serving the real economy with structural tools playing a larger role in directing funds to key areas. The PBOC will also make continuous efforts to provide long-term, stable, and low-cost funds for financial institutions.