China March loans surge to $405 billion as coronavirus stimulus kicks in

New bank lending in China rose sharply to 2.85 trillion yuan ($405 billion) in March, with total social financing hitting a record, as the central bank pumped in more liquidity and cut funding costs to support the coronavirus-ravaged economy.

Chinese policymakers have pledged to combat the impact from the pandemic that looks to have tipped the world’s second-largest economy into its first quarterly contraction in at least 30 years.

While economic activity is gradually picking up as people return to work and factories reopen, analysts warn it could take months before the economy returns to normal. The spread of the virus around the world is also sparking fears of a global recession.

New loans in March far exceeded market expectations of 1.8 trillion yuan and were three times more than February’s 905.7 billion yuan. That nudged bank lending in the first quarter to a record 7.1 trillion yuan, beating a previous peak of 5.81 trillion yuan in the first quarter of 2019, data from the People’s Bank of China (PBOC) showed on Friday.

While the PBOC has repeatedly stressed its intention to avoid “flood-like” stimulus in light of debt risks, Ruan forecast “rapid growth” in future loan demand in the second quarter, as key government-backed projects restart and pent-up consumer and real estate demand pick up.

Corporate loans almost doubled to 2.05 trillion yuan from 1.13 trillion yuan the previous month. Growth of outstanding total social financing (TSF), a broad measure of credit and liquidity in the economy, quickened to 11.5% in March from a year earlier and from 10.7% in February.

Policy sources have told Reuters the central bank will continue to ramp up its policy easing to support the economy but debt worries and property risks will prevent it from following the U.S. Federal Reserve’s steep rate cuts or quantitative easing moves. The PBOC will likely boost credit and lower funding costs, especially for small firms, and accommodate increased fiscal spending by the government, and the benchmark lending rate is likely to be cut on April 20, the sources said.

Broad M2 money supply in March grew 10.1% from a year earlier, higher than 8.8% forecast in the Reuters poll and 8.8% in February, central bank data also showed. Outstanding yuan loans grew 12.7% from a year earlier compared with 12.1% growth in February. Analysts had expected 12.1% growth. Some analysts, however, maintained the cautious view that China’s economic recovery would depend on the extent of coronavirus prevention controls.

China March loans surge to $405 billion as coronavirus stimulus kicks in, Reuters, Apr 10