China’s New Yuan Loans Surge in January
Policy Support Boosts New Yuan Loans
In January, China’s new yuan loans are expected to have surged, driven by the central bank’s efforts to bolster the country’s economy, which has been experiencing a patchy recovery.
Front-Loading of Loans by Chinese Lenders
At the beginning of the year, Chinese lenders typically front-load loans to attract high-quality customers and gain market share.
Estimated Increase in Net New Yuan Loans
The estimated net new yuan loans issued by banks last month are around 4.50 trillion yuan ($626.02 billion), a significant increase from the previous month’s 1.17 trillion yuan.
Comparison with Previous Year’s Figures
Despite the surge, it is lower than the record 4.9 trillion yuan issued in the same month a year earlier.
Bank’s Credit Support and LGFV Debt Swap
Analysts note that banks are likely to continue offering credit support for the real economy, with the continued use of local government financing vehicle (LGFV) debt swap potentially impacting existing bank loans, corporate bonds, and shadow credit.
Data Delay Due to Lunar New Year
January’s data release is expected to be delayed due to the Lunar New Year holiday from February 10-17.
Efforts to Propel Growth
To counter faltering growth, the central bank recently cut the reserve requirement ratio (RRR) for banks, releasing 1 trillion yuan in long-term liquidity.
Projections for January
For January, annual outstanding yuan loans are expected to grow by 10.4%, while broad M2 money supply growth is projected at 9.3%.
Government Bond Issuance and its Impact
Issuance of government bonds by local governments could potentially boost total social finance (TSF), a broad measure of credit and liquidity, which was 9.5% higher at the end of December.
Anticipated Rise in Total Social Finance
TSF is expected to increase to 5.55 trillion yuan in January, up from 1.94 trillion yuan in December.
China’s economy, which grew 5.2% in 2023, faced challenges such as a deepening property crisis and tepid demand, despite surpassing the official target. Efforts to stabilize the economy continue with policy interventions and support measures.
