China credit growth picks up last month

Reuters
New bank loans in China rebounded in May as policymakers urged lenders to support smaller companies struggling with weak demand at home and mounting export pressure.
Reuters

New bank loans in China rebounded in May as policymakers urged lenders to support smaller companies struggling with weak demand at home and mounting export pressure as a result of US tariffs.

Chinese banks extended 1.18 trillion yuan (US$170.7 billion) in net new yuan loans in May, up from 1.02 trillion yuan from April, according to data released by the People’s Bank of China yesterday.

The M2, a broad measure of money supply that covers cash in circulation and all deposits, rose 8.5 percent year on year to 189.12 trillion yuan at the end of May.

Household loans, mostly mortgages, rose to 662.5 billion yuan in May from 525.8 billion yuan in April, while corporate loans rose to 522.4 billion yuan in May from 347.1 billion yuan a month earlier, the data showed.

Growth of outstanding total social financing, a broad measure of credit and liquidity in the economy, quickened to 10.6 percent in May from a year earlier from 10.4 percent in April.

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 May, TSF rose to 1.4 trillion yuan from 1.36 trillion yuan in April.

The PBOC stepped up efforts to increase loan growth and business activity in May, announcing a three-phase cut in regional banks’ reserve requirements to reduce financing costs for small and private companies.

It has now delivered six RRR cuts since early 2018. Further cuts in banks’ reserve requirements are expected this year.

China’s push to shore up economic growth pushed a key debt ratio to the highest level since 1993 in the first quarter, Caixin magazine reported recently, citing a study by two think tanks: the National Institution for Finance & Development and the Institute of Economics, under the Chinese Academy of Social Sciences.

China’s ratio of outstanding debt in the real economy to nominal GDP increased to 248.83 percent, up 5.1 percentage points from end-2018, the study showed. Debt levels had moderated somewhat in the last few years due to a government clampdown on risk.

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