BEIJING -China's new bank loans fell more than expected in April while money supply growth slowed to a 21-month low, as the central bank gradually scales back pandemic-driven stimulus to reduce debt and financial risks in hot areas of the economy.
The world's second-largest economy grew by a record 18.3per cent in the first quarter, rebounding from last year's coronavirus shock, driven by strong domestic consumption, surging exports and continued government support for businesses, especially smaller firms.
But a surge in loans early this year, following record lending in 2020, had prompted regulators to tell banks to trim their books to guard against risks of speculative bubbles forming in the country's financial and property markets, Reuters reported.
"April's fall in total social financing growth was much larger, and bank loans, corporate debt financing and non-standard financing all showed a relatively large contraction," said Luo Yunong, fixed income analyst at Industrial Securities.
"Weak demand for financing is the main reason, not the tightening of liquidity supply."
Chinese banks extended 1.47 trillion yuan (US$228.21 billion) in new yuan loans in April, down from 2.73 trillion yuan in March and lagging analysts' expectations of 1.6 trillion yuan, according to data released by the People's Bank of China (PBOC) on Wednesday.
The tally also was lower than 1.7 trillion yuan issued the same month a year earlier, when policymakers rolled out unprecedented measures to deal with the shock from the coronavirus crisis.
Growth in outstanding yuan loans eased to 12.3per cent from a year earlier, the slowest pace since February 2020, and compared with 12.6per cent in March. Analysts had expected 12.5per cent growth.
Excluding the sharp drop seen during COVID-19 lockdowns early last year, loan growth in April was the slowest since 2002.
Broad M2 money supply grew 8.1per cent from a year earlier, dipping to the lowest since July 2019, and well below estimates of 9.3per cent forecast in the Reuters poll. It rose 9.4per cent in March.
Investors are increasingly worried about policy tightening as Beijing looks to exit from emergency measures now that the economy is bouncing back from the depths of the pandemic and policymakers turn their focus to containing debt risks.
Top leaders last week repeated the pledge that they would not make a sudden turn in macro policy, and will make the economic recovery more balanced.
The government has extended a loan repayment relief scheme for small firms to the end of this year.
While interest rate hikes are not seen on the cards in China this year due to continued global uncertainties, most analysts expect policy normalisation to continue and previous stimulus policies to be gradually wound down, with credit conditions likely to remain relatively tight throughout the year.
Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, slowed to 11.7per cent in April from a year earlier and from 12.3per cent in March.
"We’d been forecasting a deceleration in broad credit growth to 11.5per cent around this middle of this year. If anything, the latest figures suggest the slowdown is happening even faster," Capital Economics said in a note.
"And we expect it to continue through the second half, to about 10.5per cent in December. If that happens, this will be a continued headwind to the economy over the next few quarters."
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.
TSF missed expectations in April, when it fell to 1.85 trillion yuan from 3.34 trillion yuan in March. Analysts polled by Reuters had expected April TSF of 2.25 trillion yuan.
(Reporting by Lusha Zhang and Kevin Yao; Editing by Kim Coghill)