Bank loans fall in February as PBOC tapers credit

New bank lending in China fell less than expected in February from January as the central bank seeks to cool credit growth to contain debt risks while maintaining support for ailing small firms.

Chinese banks extended 1.36 trillion yuan (US$208.86 billion) in new local-currency loans in February, down from a record 3.58 trillion yuan in January but beating analyst expectations, according to data released by the People’s Bank of China on Wednesday.

Analysts polled by Reuters had predicted 950 billion of new yuan loans in February, versus 905.7 billion yuan a year earlier.

“Credit supply was stronger than expected,” said Industrial Securities analyst Luo Yunong. “The central bank has tightened credit at the margin, but real financing demand is very strong.”

China’s central bank has pledged to stabilize the country’s overall debt level that jumped last year due to stimulus measures, but has said it will avoid a sudden policy shift and will continue to support ailing small firms.

Broad M2 money supply in February grew 10.1 percent from a year earlier, central bank data showed on Wednesday, above a forecast 9.4 percent in a Reuters poll. It rose 9.4 percent in January.

Outstanding yuan loans grew 12.9 percent from a year earlier compared with 12.7 percent growth in January. Analysts had expected 12.7 percent growth.

Annual growth of outstanding total social financing, a broad measure of credit and liquidity in the economy, quickened to 13.3 percent in February from 13 percent in January.

Analysts expect that growth rate to slow to about 11 percent at the end of 2021.