China’s banks extended a record 2.9 trillion yuan ($458.3 billion) in new yuan loans in January, blowing past expectations and nearly five times the previous month as policymakers aim to sustain solid economic growth while reining in debt risks.
Net new loans surpassed the previous record of 2.51 trillion yuan in January 2016, which is likely to support growth not only in China but underpin liquidity globally as major western central banks begin to withdraw stimulus, Reuters reported.
Chinese banks tend to front-load loans early in the year to get higher-quality customers and win market share, but the lofty January figure was even higher than the most bullish forecast by economists in a Reuters poll.
Analysts polled by Reuters had predicted new yuan loans of two trillion yuan, up sharply from December’s 584.4 billion yuan.
Beijing is in the second year of a regulatory push to contain financial risks and clamp down on riskier types of financing that have been fuelled by a rapid build-up in debt. But authorities are proceeding cautiously to avoid any sharp blow to economic growth or excessive financial market volatility.
Broad M2 money supply also beat expectations, growing 8.6% in January from a year earlier, central bank data showed on Monday. Economists had expected the growth rate to edge up to 8.4% from 8.2% in December.
After the December data was released, People's Bank of China spokeswoman Ruan Jianhong said the weak M2 growth was caused by a crackdown on banks’ off-balance sheet activities and that lower M2 growth may become a new normal.
Credit Still Ample
Outstanding yuan loans grew 13.2% from a year earlier, also faster than an expected 12.5% rise and compared with an increase of 12.7% in December. Last year China’s total new loans hit a record 13.53 trillion yuan, 7% more than the previous record in 2016.
The credit boom has been fuelled by strong economic growth, a robust property market and a crackdown on riskier shadow lending, which has forced banks to shift such loans back onto their balance sheets.
Since the start of 2017, Chinese regulators have announced a slew of steps to coax financial institutions to reduce riskier activity and leverage, targeting everything from interbank lending levels to bond trading, negotiable certificates of deposit and entrusted loans.
The PBOC has also been gingerly nudging up money market interest rates, most recently in December, but rates have also been slowly creeping higher on their own as regulators look set to persist with the “de-risking” campaign much longer than policy crackdowns in the past.
Those efforts are showing some progress. The outstanding amount of banking wealth management products grew just 1.7% last year, compared with a near 24% rise in 2016. Many of these products had strong links with the less regulated shadow banking sector.
Analysts expect authorities to step up their efforts this year, focusing on local government debt, rising corporate and household debt levels and dealing with “zombie” companies.
Employment First
China will boost its job creation effort and promote entrepreneurship this year, a spokeswoman for the top state planner said on Sunday, under pressure to find work for millions of unemployed people and new college graduates.
Meng Wei of the National and Development Reform Commission said China needs to create jobs for 9.7 million people registered as unemployed and 8.2 million new college graduates, as well as workers affected by industrial capacity cuts.
China's urban-registered unemployment rate fell to 3.9% last year and has remained generally stable despite slowing economic growth and the government forging ahead with plans to cut back industrial capacity.
Many analysts say, however, that the official data is an unreliable indicator of employment conditions because it only measures employment in urban areas and does not take into account the millions of migrant workers who form the bedrock of China's labor force.
"We will implement an employment-first strategy and more proactive employment policies...and vigorously promote employment and entrepreneurship," Meng told a news conference on Sunday, adding that protecting jobs was fundamental to China's stable growth policy.
Authorities are counting on "new growth engines" such as technology and services to support job creation. Meng said China will create a policy environment that supports the digital economy and will promote the big data, artificial intelligence and industrial internet sectors.
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