China January new yuan loans climb to record high in seasonal surge

Tue Feb 16, 2016 3:44am EST
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By Kevin Yao and Xiaoyi Shao

BEIJING (Reuters) - Chinese banks armed with fresh lending quotas extended a record 2.51 trillion yuan ($385.40 billion) of new loans in January, far more than markets had expected, suggesting Beijing is keeping monetary policy loose to counter a protracted economic slowdown.

Economists polled by Reuters had expected new yuan loans to surge to a near seven-year high of 1.8 trillion yuan in January, tripling from 597.8 billion yuan in December.

Analysts attributed the lending spike to increased injections by the central bank ahead of the Lunar New Year holidays in early February, a traditional tendency among Chinese banks to "front load" loans at the start of a year and companies reducing their exposure to foreign-currency loans.

"Chinese banks expanded their balance sheet aggressively in the first month of this year, which implies implicit support from the government to counter the economic slowdown," said Zhou Hao, Commerzbank Asia senior emerging markets economist in Singapore.

Analysts also attributed the surge in new loans to soaring demand for mortgages as property prices recover and government steps to fast-track infrastructure projects to spur activity.

While economists have sometimes speculated that big swings in China's credit data were linked more to speculative activity, the latest data appeared to suggest solid demand in the real economy. Medium-and long-term loans to households were up 45 percent in January from the same period a year ago while such loans to companies jumped 73 percent.

Total social financing, another important indicator of China's credit expansion, rose to 3.42 trillion yuan in January from 1.82 trillion yuan in December.

Part of that may reflect massive infusions of cash into the banking system by the People's Bank of China ahead of the long holiday to avert any risks of a cash crunch. The PBOC injected 1.53 trillion yuan via its standing lending facility (SLF), medium-term lending facility (MLF) and pledged supplementary lending (PSL).   Continued...

A vendor holds Chinese Yuan notes at a market in Beijing, August 12, 2015. REUTERS/Jason Lee