China’s Record High Bank Lending Boosts Post-COVID Economic Recovery

Summary

  • Chinese policymakers are implementing additional measures to support the subpar post-pandemic recovery in the world’s second-largest economy.
  • The People’s Bank of China (PBOC) reported the issuance of record new yuan loans of 4.92 trillion yuan in January.
  • Chinese lenders traditionally front-load loans at the start of the year to attract high-quality customers and gain market share.
  • There is a noticeable cooling in China’s economy, with a major property crisis and extended stock market turbulence.

Further Measures to Assist Post-Pandemic Recovery

Additional efforts to aid the substandard economic recovery after COVID-19 are being put into action by policymakers. These measures are in response to a severe property crisis and extended stock market turbulence in the world’s number two economy.

Chinese lending companies typically front-load loans at the start of each year to attract premium customers and capture market share.

Record High in New Yuan Loans

An all-time high was achieved in January, as banks provided new yuan loans amounting to 4.92 trillion yuan ($683.7 billion). This sharp increase from December outperforms analysts’ expectations, according to PBOC’s data published on Friday.

Lending for January quadrupled compared to December’s 1.17 trillion, beating even the previously set record of 4.9 trillion yuan established in the same month of the previous year.

Monetary Policy and Economic Outlook

Analysts predict a slight loosening of monetary policy, following stronger than anticipated bank lending in January. This is likely to bolster the real economy, according to Huajin Securities economist Luo Yunfeng.

Meanwhile, Chinese banks granted a record 22.75 trillion yuan in new loans over the last year. Despite this, loan growth has slumped to its lowest in over two decades due to a bleak economic outlook that has left both firms and consumers hesitant to incur more debt.

Adjustments to Monetary Policy amid Economic Flux

China’s economic growth, albeit meeting the official target, was shakier than predicted, casting uncertainty over the coming year due to factors such as an escalating property crisis, rising deflationary threats, and sluggish demand.

The central bank has pledged to retain flexible and precise policy to stimulate domestic demand, while ensuring price stability, given signs of an inconsistent economic recovery and constant deflationary risks.

Increasing Loan Activity

Mortgage lending reached 980.1 billion yuan in January from 222.1 billion yuan in December, while corporate loans skyrocketed to 3.86 trillion yuan from 891.6 billion yuan.

Outstanding yuan loan growth also decelerated, standing at 10.4% compared to December’s 10.6%. This reduction in growth marks a more than 20-year low.

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