China’s banks granted new loans at the fastest pace on record in January, a sign that Beijing is loosening monetary policy more aggressively in an attempt to bolster the slowing economy.
China grew at its slowest pace since 1990 last year, dragged down by a severe downturn in manufacturing and construction, once the main growth drivers.
Policymakers have sought to strike a balance between supporting short-term growth with interest-rate cuts and higher loan volumes without exacerbating longer-term risks from excessive debt. Loan demand from corporate borrowers has also been tepid, as factory owners delay investments amid severe overcapacity in many sectors.
That trend appeared to reverse in January, however, as new local currency bank loans to the real economy soared to a monthly record of Rmb2.5tn ($390bn). Credit from all sources, including bonds and off-balance-sheet lending, was Rmb3.2tn, also a monthly record, as corporate bond issuance hit an all-time high.
“Judging from recent speeches by top leaders and January’s credit growth, this year policymakers seem to be determined to make the economy grow above their bottom line of 6.5 per cent,” said Larry Hu, China economist at Macquarie Securities.
麦格理证券(Macquarie Securities)中国经济学家胡伟俊(Larry Hu)表示：“根据最高领导人最近的演讲和1月份信贷增速判断，今年政策制定者似乎决心让经济增速高于6.5%的底线。”
Residential mortgages helped drive January’s strong lending figure, the latest sign that China’s housing market is gradually recovering from a downturn that began in 2014. However, UBS economist Donna Kwok cautioned that banks are “unlikely” to maintain last month’s record pace, especially while the central bank continues to encourage “prudent credit expansion”.
January is nearly always the biggest month of the year for lending, as banks have fresh loan quotas to start the calendar year. The timing of this year’s lunar new year holiday is likely to have amplified this seasonality, as banks accelerated lending ahead of the break.
Renminbi depreciation may also have boosted demand for loans. In the years when the renminbi was viewed as a one-way bet to appreciate, Chinese companies were eager to borrow in dollars, since the debt burden was expected to be lighter in renminbi terms when the loan came due. Now, the opposite dynamic is at play, and many Chinese companies are borrowing in renminbi to replace foreign currency debt.