China’s Credit Growth Accelerates in Boost to Economic Outlook

China’s broadest measure of new credit rose for a third straight month, suggesting stimulus measures are cushioning a slowdown in the world’s second-largest economy.

Aggregate financing was 2.05 trillion yuan ($328 billion) in January, the People’s Bank of China said in Beijing on Friday, matching economists’ estimates. Trust and entrusted loans, vehicles for shadow lending, dropped from December as local-currency bank lending doubled from a month earlier.

With annual economic growth sliding toward 7 percent in the final months of 2014, the PBOC cut benchmark interest rates in November. It followed up that move this month by lowering banks’ required reserve ratios to counter capital outflows.

“Bank lending is stronger than expected, and it can help keep economic growth from slowing further,” said Xu Gao, chief economist at Everbright Securities Co. in Beijing. “It’s particularly positive for January because most of the new yuan loans were probably used for economic activities on the ground” after the government sought to curb lending for stock purchases last month, he said.

New yuan loans totaled 1.47 trillion yuan, up from 697.3 million in December. M2 money supply rose 10.8 percent from a year earlier, the slowest pace since at least 1996, according to data compiled by Bloomberg.

Entrusted loans totaled 80.4 billion yuan, while trust loans, which are pooled loans sold as funds to investors, were just 5.2 billion yuan, the data showed.

It points to a credit picture of “more banking, less shadow banking,” Wang Tao, chief China economist at UBS Group AG in Hong Kong, wrote in an e-mail. “This trend is good as it will reduce overall financing costs.”

Futures Gain

SGX FTSE China A50 Index futures rose 0.2 percent in Singapore after the close of Chinese trading on Friday. The benchmark Shanghai Composite Index climbed 1 percent before the figures were released.

Compared with a year earlier, the credit data is less positive, Bloomberg economist Tom Orlik wrote.

Slower inflation “muted the impact of November’s rate cut, leaving real borrowing costs higher than before the PBOC’s move,” Orlik wrote. “Taken together, lackluster loan growth and continued high borrowing costs reinforce the case for a second benchmark rate cut.”

China this month cut the amount of cash banks must set aside as reserves. The 50 basis point RRR reduction was the first across-the-board cut since May 2012. It will inject as much as 600 billion yuan into the banking system, Australia & New Zealand Banking Group Ltd. economists estimate.

Analysts forecast more cuts to the RRR and benchmark rate in the first half, according to a Bloomberg survey.

— With assistance by Xin Zhou

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